Fueled by its dominance in artificial intelligence (AI) chips, Nvidia last month became the first company to cross $4 trillion in market capitalization. Its market value is now only about $1 trillion below Japan’s Nikkei 225 index, the world’s second-largest stock market after the United States. The company also accounts for 4.94% of the MSCI All Country World Index, nearly matching Japan’s 4.97% share.
Analysts turn even more bullish
Cantor Fitzgerald lifted its Nvidia target to $240 from $200 on August 18, writing that “China is already de-risked in Street models, and the goal here is to get China to build on NVDA’s platform. Any progress here should be well-received,” according to Bloomberg. Other brokerages including Wedbush, KeyBanc, UBS, Morgan Stanley and Susquehanna have also raised their targets this month. Nearly 90% of analysts covering Nvidia rate it a buy-equivalent, Bloomberg data showed.
UBS, for its part, reiterated its buy rating last week and boosted its price target to $205 from $175, noting it is growing more bullish on the stock ahead of earnings, CNBC reported.
The AI bellwether
Nvidia shares have surged more than 30% this year, extending their gain to over 1,400% since October 2022. Its weight in the S&P 500 Index is now close to 8%, cementing its status as a bellwether for both the technology sector and the broader U.S. market. About 40% of its revenue comes from Microsoft, Alphabet, Meta and Amazon, all of which are among the index’s biggest constituents.
The stock rose 1.7% on August 22, snapping a three-day losing streak and moving to within 3% of a record high set earlier this month. But with expectations running high, analysts caution that even a modest miss on results could spark a selloff that reverberates across markets.
Earnings in focus
Nvidia reports fiscal second-quarter results on August 27, closing out an earnings season in the U.S. that has generally exceeded forecasts. Wall Street expects adjusted earnings of $1.01 per share, up 48% from a year earlier, on revenue of more than $46 billion, a 54% jump, according to Bloomberg and LSEG data.
The report comes at a delicate moment for markets. Federal Reserve Chair Jerome Powell’s signal that rate cuts are coming lifted equities last week after a stretch of weakness, but investors now want confirmation that AI spending can sustain the rally. Any commentary from Nvidia on demand or capital spending, particularly in relation to China, will be parsed closely.
As the world’s most valuable chipmaker, Nvidia’s outlook could decide whether the latest market surge endures, or whether sky-high expectations finally catch up to Wall Street’s favourite stock.
Also read | Jensen Huang richer by another $28 billion this year amid Nvidia’s $4 trillion feat
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
