Not only is Nvidia (NASDAQ:NVDA) a top-tier artificial intelligence chip maker, but it’s also among the most successful “Magnificent Seven” companies of 2023. NVDA stock earns a confident “A” grade as Nvidia can remain a durable AI-hardware distributor in 2024 and beyond.
After a spectacular first half of 2023, Nvidia stock had difficulty breaking above the key $500 level. This opens up the idea that Nvidia might actually be undervalued. It’s a concept worth considering, especially when investors consider the bullish arguments that a couple of Wall Street experts make.
Nvidia Leads the ‘Most Consequential Growth Vector’
Even though NVDA stock had trouble breaking through $500 in late 2023, TD Cowen analyst Matthew Ramsay assigned it an “outperform” rating and a $700 price target. Furthermore, Ramsay called Nvidia his “Best Idea for 2024.”
Ramsay’s optimism makes sense when we look at the larger context of the AI revolution. Nvidia, Ramsay contends, is the “leader in the most consequential growth vector of computing arguably ever (and certainly since the advent of the Internet).”
Nvidia grew rapidly as the first wave of customers spent money on generative AI hardware. Next year, the wave of AI spending could expand to a much wider range of clients, including very large companies.
Moreover, per Barron’s, Ramsay sees Nvidia transitioning from selling AI-enabled microchips to “selling full systems including software.” This will allow Nvidia to “capture a higher percentage of the overall spending on data centers.” Nvidia stock can ride to $700 on the company’s evolution and the AI processor market’s expected expansion.
NVDA Stock Is Actually Cheap Now
Turning to another analyst, Bernstein’s Stacy Ragson made a statement that will undoubtedly surprise some value-focused investors. Ragson recently declared, “Today Nvidia is in fact the cheapest of the ‘AI narrative’ stocks out there.”
Like Ramsay, Ragson assigned NVDA stock an “outperform” rating and a price target of $700. Yet, Ragson’s bullish argument is different from Ramsay’s.
Interestingly, Ragson considers Nvidia undervalued based on earnings estimates. “[W]hile forward [earnings] estimates have quadrupled this year as generative AI has boomed, multiples have compressed by almost 2/3 during the same period,” the Bernstein analyst explained.
Based on the math, Ragson’s argument seems to have merit. Specifically, Ragson determined Nvidia trades at 25 times the company’s forward (i.e., expected) earnings. This represents Nvidia’s lowest forward earnings multiple since the end of 2018. So, by that measure, the company’s stock shares aren’t overpriced at all.
Nvidia Stock: After a Break Above $500, the Sky’s the Limit
Going forward into the new year, investors should expect Nvidia to grow and evolve along with the AI hardware market. If Nvidia stock got stuck at $500 for a while in 2023, that was likely just a temporary roadblock.
Besides, investors should consider the argument that Nvidia might actually be undervalued, based on the company’s expected earnings. All in all, NVDA stock gets an easy “A” grade and has the potential to move far beyond $500.
On the date of publication, Louis Navellier had a long position in NVDA. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
