Nvidia Corp. NVDA shares have surged since the beginning of 2023, with the upward momentum showing no signs of slowing despite concerns about stretched valuations.
Munster’s Take: Gene Munster of Deepwater Asset Management recently delved into the intriguing connection between the chipmaker and inflation — a focal point for the Federal Reserve during its current rate-tightening cycle.
In a post on X, Munster wrote, “What do inflation and $NVDA have in common? Their growth will be higher for longer.”
He clarified, however, that the concept of “longer” may not be indefinite.
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The Fine Print: During an interview with CNBC, Munster expressed confidence in the numerous $1,000 price targets set by analysts for Nvidia following its earnings report. He anticipates the stock to trade above $1,000, perhaps within a year or two.
“But when I think about those price targets, I think it is important to quickly step back and think about Nvidia’s business before you get quickly carried away,” Munster said. “It’s a boom-and-bust business.”
He pointed out that before the AI surge, Nvidia’s business experienced an average decline of 17% per quarter, whereas now it has seen an average increase of 200%.
“The central question about those price targets comes down to what is Nvidia’s underlying growth,” he said. That depends on the outlook for AI, he added.
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Boom-Bust Business: Munster said these boom-and-bust businesses have had a scarring effect on investors over the past five years. “But my view forward is that those price targets are probably going to ultimately, the $1,000+, prove to be conservative because AI is that big of a deal,” he said.
Drawing a data point from the earnings call, Munster noted that Inference is consuming 40% of the GPU usage, not “hyper-scalers” building their infrastructure and waiting on business to come through. Nvidia is going to benefit tremendously from the increasing AI adoption, he said.
Sell-side analysts and investors see an inevitable correction could come in 2026, with analysts seeing 20% growth in 2025 followed by a down year in 2026. But Munster differed with the view. “I don’t think the bust is going to come in 26,” he said. The AI frenzy could last until there is going to be bust and that probably is three to five years from now, he added.
“The bust is going to be epic when it happens. But I think there is plenty of room for upside until we get there,” Munster said.
Price Action: Nvidia ended Thursday’s session up 16.40% to $785.38, according to Benzinga Pro data.
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