Nvidia Stock Surges 20% in Five Weeks: Reasons Behind Analyst Optimism

Nvidia (NVDA) is at the forefront of a technological transformation driven by swift advances in artificial intelligence (AI). The company has seen remarkable growth over recent years, so much so that it's easy to overlook its recent short-term performance. In just five weeks, Nvidia's stock price has jumped over 20%, which would make most investors very pleased.

What’s Driving Nvidia’s Recent Surge?

The recent surge in Nvidia's stock can be summed up in one word: Blackwell. According to CEO Jensen Huang, the demand for Nvidia's new Blackwell AI chip is "insane." He remarked in a recent interview that businesses want the best tech available and wish to be the first to utilize it.

Nvidia's introduction of the Blackwell GPU architecture in March 2024 was met with enthusiasm. The announcement boldly claimed that this technology would usher in a "new era of computing." Blackwell is designed to run large language models (LLMs) with an impressive 1 trillion parameters while significantly reducing costs and energy usage compared to Nvidia's previous leading platform, Hopper. Major companies like Alphabet, Amazon, Meta Platforms, Microsoft, Oracle, and OpenAI have all expressed plans to adopt this new technology.

While Nvidia's stock experienced a brief pullback after news surfaced that the U.S. might limit exports of advanced AI chips to certain Middle Eastern countries, the long-term outlook remains robust.

Why Analysts Remain Bullish on Nvidia

Currently, analysts believe there is still room for growth in Nvidia's stock. The average 12-month price target suggests a potential upside of almost 14%, with some analysts predicting an increase of up to 55% within that timeframe.

Though the enthusiasm from Wall Street has slightly waned due to the surge in Nvidia's stock price, a majority of analysts still view it favorably. In September, 55 out of 60 analysts rated Nvidia as a "buy" or "strong buy." A more recent analysis in October from LSEG has identified that out of 38 analysts, 22 still recommend it as a "buy" or "strong buy."

The sustained confidence from analysts can be attributed to Nvidia's strong position in the AI chip market. Despite facing competition, its GPUs are viewed as the benchmark for training and executing AI models.

Morgan Stanley has noted that Nvidia's Blackwell GPUs are sold out for the next year. Analyst Joseph Moore emphasized the belief that the market is still in the early phases of a lengthy investment cycle in AI, leading Morgan Stanley to label Nvidia as a "Top Pick."

Will Wall Street's Predictions Hold Up?

It remains to be seen whether Wall Street's forecast of a further 14% rise in Nvidia's stock will materialize over the next year. However, it is possible that this target might be too cautious.

Nvidia has yet to announce sales figures for its Blackwell chips. As these figures begin to surface and show growth, it's likely that many analysts could revise their price targets upward.

The AI revolution is still in its infancy, as reiterated by Morgan Stanley's Moore. With Nvidia's leading role in this evolution, it is likely to continue making headlines in the technology landscape for the foreseeable future.

stocks, Nvidia, AI