Against a soft backdrop on Wall Street Monday, shares of technology stalwart Nvidia (NASDAQ:NVDA) helped brighten the atmosphere. Specifically, the smiles came courtesy of Goldman Sachs, which added the semiconductor enterprise to its Americas conviction list for October. Further, the research arm of the investment bank sees NVDA stock hitting $605, which leads to a tantalizing debate.
On the one hand, it’s no surprise that Goldman Sachs rates Nvidia a “buy.” Almost every other covering analyst has done the same. Therefore, a contrarian expert would need to forward compelling evidence to go against the grain. Instead, the investment bank chose to stand by the status quo, which appears a sensible move.
Goldman believes that the graphics processing unit (GPU) manufacturer will “maintain its status as the accelerated computing industry standard for the foreseeable future” thanks to its competitive moat. Additionally, the rate of customer development and deployment of increasingly complex artificial intelligence models has been impressive.
Critically, the financial institution notes that Nvidia’s dominance in the data center industry will not abate anytime soon. Adding to the positive sentiment, evidence exists that chip supply constrains are starting to ease. Since the start of the year, NVDA stock has gained about 213%.
Will NVDA Stock Break $600? It’s a Complicated Narrative.
Although receiving a high-end price target from a vaunted institution like Goldman Sachs represents strong praise, at the end of the day, anyone can make price targets. NVDA stock actually reaching and breaching the blue-sky target of $600 is another matter. For that, the options market — the so-called smart money arena — may provide some insights.
First, on a tactical level, it appears that traders don’t anticipate much movement this week. Turning to Fintel’s options flow screener — which exclusively targets big block trades likely made by institutions — the most recent significant trade was for the writing of 19,700 contracts of the Oct. 6, 2023, $445 put, posted earlier this Monday.
A few minutes prior to the above transaction, another trader (or traders) wrote 21,832 contracts of the Oct. 6, 2023, $460 call. In this case, the trader(s) — who received a premium of $212,390 — is, assuming a face-value interpretation, hoping that NVDA stock doesn’t reach $460. That way, the maximum premium can be collected as the call expires worthless.
On the flipside, the put writer(s) hopes that NVDA stock won’t dip to $445 or that much below it. It’s an aggressive wager because NVDA trades at just under $447.
As for the $600 target, traders have recently started taking bets that NVDA stock won’t get there. For example, on Sept. 21, a trader wrote 737 contracts of the June 21, 2024, $600 call, collecting a premium of $1.58 million.
Why It Matters
Ultimately, it’s a brave contrarian that decides to bet against NVDA stock. Currently, analysts rate share a strong buy based on 39 buys and only one hold. Moreover, in a nod to the theme of the day, the average price target lands at $639.82, implying more than 43% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
