Nvidia’s stock price has skyrocketed over 200% in the past year, driven largely by hype around artificial intelligence and the company’s leadership position in AI chips. As we enter 2024, analysts are debating whether the run-up is justified and how much room Nvidia has left to grow.
2023 Recap: Tripling on AI Potential
Nvidia closed 2023 at $312 per share, more than triple its 2022 year-end price. The rally was fueled by enthusiasm about the transformative potential of AI, as Nvidia produces the top graphics processing units (GPUs) used to power AI applications.
Investor anticipation built through 2023 that explosive AI growth would drive massive demand for Nvidia’s data center products. The company also made key strides over the past year:
- Released new GPU architectures optimized for AI workloads
- Struck major partnerships with AI leaders like Anthropic
- Dominated in AI model training performance benchmarks
As AI models grew ever larger in 2023, Nvidia cemented its status as the preferred AI chip provider.
Where Analysts See Nvidia Heading in 2024
Bull Case Sees 50-100% More Upside
Many analysts remain staunchly bullish on Nvidia entering 2024, believing its leadership in the accelerating AI revolution warrants an even higher valuation.
JPMorgan’s top semiconductor analyst Harlan Sur set a 2024 price target of $625 in December 2023. This implies 50% upside from current levels. Sur is highly confident that surging AI demand will drive Nvidia’s data center sales to double by 2025.
Other bulls see the stock potentially doubling again, to $600+ per share:
- Citi analyst Atif Malik set a sky-high target of $600 for the end of 2024. Malik believes Nvidia will maintain >80% market share in AI training chips.
- Wedbush analyst Matt Bryson has a $500 price target, seeing accelerating AI workload growth boosting data center sales by 40% annually through 2025.
Risks: Competition, Regulation, Economic Slowdown
Not all analysts are ultra-bullish though. Many point to risks that could derail Nvidia’s meteoric rise:
1. Intensifying competition – Rival chipmakers like AMD and Intel are gunning for Nvidia’s data center dominance. If they gain significant market share, it could pressure Nvidia’s ability to charge high premiums.
2. AI regulation – Governments are paying more attention to potential dangers from advanced AI, like job losses. Tighter regulations could slow enterprise AI adoption.
3. Economic issues – A recession could substantially dampen demand growth for data center chips. Supply chain problems could also continue plaguing production.
Some analysts believe the stock already reflects extremely lofty growth assumptions.
- Bernstein’s Stacy Rasgon cut his target to $250 based on a 40% downside risk if growth falters. Rasgon sees emerging competition, like the recent launch of Google’s and Microsoft’s own training chips, presenting challenges to Nvidia’s dominance.
So while Nvidia remains a Wall Street favorite, more caution is seeping into 2024 outlooks. Investors may need to reset sky-high expectations.
Key AI Developments Driving Nvidia’s Business
Several major AI advances over the past year helped spark much of the fervor around Nvidia’s prospects.
Transformer Models Go Mainstream
In 2023, a new AI technique called transformers emerged from research labs and began powering many real-world applications. Transformers are especially adept at analyzing language and generating human-like text and images.
Nvidia’s GPUs excel at running these hungry transformer models. The largest transformers have billions of parameters and require thousands of GPUs working in parallel to train.
As more companies deploy transformers in 2024 for chatbots, search engines, and creative tools, demand for Nvidia chips should flourish.
Anthropic Partnership
Nvidia announced a major partnership in 2023 with AI safety startup Anthropic to co-design AI computing platforms. Nvidia will leverage Anthropic’s expertise training robust and trustworthy models to develop new GPU server infrastructure.
This collaboration aims to greatly expand access to powerful AI through new cloud offerings. More widespread AI adoption should drive data center sales higher.
What Could Derail the Stock in 2024
Nvidia stock won’t likely continue doubling year after year. At some point hype gives way to reality.
Here are key signals that could cause NVidia’s valuation to come back down to earth:
Losing Data Center Dominance
If AMD, Intel or other chipmakers begin seriously eroding Nvidia’s >80% market share in data center AI accelerators, it would shatter assumptions of exponentially growing data center revenue.
Competition is heating up, with rival hardware and new optimized software alternatives emerging. If these alternatives prove suitable for training the latest large AI models, customers may migrate away from Nvidia’s pricey GPUs.
Slowing AI Model Growth
Much of the excitement around Nvidia’s opportunity is based on AI models continuing to expand exponentially, requiring ever more computing power.
If model size plateaus – a distinct possibility as techniques mature – long-term demand could fall short of hopes. For example, Anthropic’s Claude model is designed to be compact, efficient and stable unlike models chasing ever-higher complexity.
Recession Impacting IT Spend
Nvidia remains vulnerable to the economic cycle like any hardware provider. In a recession corporations curtail investment in new servers and data centers.
While AI initiatives may be strategic priorities, a prolonged downturn would likely substantially dampen near-term demand growth assumptions.
| Key Metric | Bull Case (base case) |
Bear Case |
|---|---|---|
| 2024 Stock Price | $500+ | $200-300 |
| Data Center Revenue Growth | 40%+ | 20-30% |
| AI Model Parameters | 100 trillion+ in 2025 | <10 trillion |
| Market Share | 80%+ | 50-70% |
Table comparing bull and bear scenario key metrics for Nvidia in 2024
Final Thoughts: AI Promises vs. Economic Reality
Nvidia finds itself at the center of the AI transformation, powering development of models that could redefine how humans and computers interact. Investors are betting heavily that explosive growth in intelligent applications drives booming demand for Nvidia hardware over the next decade.
However, no trend progresses linearly without interruptions. While AI progress could very well support Nvidia’s valuation soaring ever higher, hype invariably gets ahead of reality. Changing competitive dynamics or economic turmoil could be dampeners as we get deeper into 2024.
Yet even analysts cautious on the stock’s towering height concede Nvidia’s long-term positioning remains enviable. The AI revolution may unfold differently than optimists currently envision, but Nvidia’s technology will likely still be at the heart of unlocking AI’s possibilities. Its leadership today foreshadows many innovative breakthroughs ahead.
To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.
