Nvidia’s share price hit another all-time high on Monday, continuing its epic run over the past year driven largely by excitement around artificial intelligence. The stock closed up over 4% at a record $236, valuing the company at over $500 billion.
2024 Poised to Be Big Year for Nvidia’s AI Business
Nvidia has been one of the top-performing stocks over the past few years thanks to its leadership position in AI chips and software. 2023 saw the company’s stock price triple, and analysts are even more bullish on 2024.
According to Bank of America analyst Vivek Arya, Nvidia is poised to generate nearly $100 billion in free cash flow over the next two years, fueling further growth through M&A and organic investments. The company is dominating the AI hardware market right now, with its graphics processing units (GPUs) being the processor of choice for training AI models.
Nvidia Stock Performance
2022 Share Price Return: +57%
2023 Share Price Return: +124%
With AI permeating across industries from healthcare to autonomous vehicles, Nvidia finds itself at the center of secular growth trends that show no signs of slowing down. The company also continues to widen its moat in AI infrastructure, as evidenced by new partnerships announced at CES 2023.
BofA named Nvidia its top semiconductor pick for 2024, projecting another 50% upside for the stock price this year. Other analysts echoed this bullish sentiment, touting Nvidia’s potential in generative AI and “GenAI” – using AI to create better AI.
Data Center Overtakes Gaming as Key Revenue Driver
Nvidia originated as a gaming graphics chip company, but gaming is no longer its primary revenue driver. In 2022, Nvidia’s data center business overtook gaming for the first time, accounting for over 50% of total sales.
Nvidia Revenue Breakdown
| Segment | % of 2022 Revenue |
| ------------- |:-------------:|
| Gaming | 41% |
| Data Center | 52% |
| Professional Visualization & Automotive | 7% |
Data center includes sales of GPUs and AI infrastructure software to cloud providers, high-performance computing sites, and enterprises. As AI workloads continue to shift to the cloud, Nvidia is positioned to capitalize on growing data center spend.
The company’s automotive segment also shows promise for long-term growth with its DRIVE platform for autonomous vehicles. However, this business remains small for now.
Lingering Risks and Potential Headwinds
Despite Wall Street’s exuberance, there are still risks around owning Nvidia stock at these elevated valuations. The current AI hype cycle could lead to a period of disillusionment if the technology does not immediately revolutionize industries.
Nvidia is still primarily dependent on the semiconductor cycle and end demand for PCs and data centers. A broader economic slowdown could dampen near-term financial results. Competition also continues to heat up, with rival AI chips from AMD, Intel and startups aiming to challenge Nvidia.
Nonetheless, analysts see Nvidia’s long-runway for expansion justifying a premium valuation. The company is poised to be a major player in the AI revolution over the next decade. With strong execution on both organic and inorganic growth, Nvidia’s share price could continue climbing to new highs.
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