We hiked our Nvidia price target — encouraged by new highs after Goldman Sachs' bear case takedown

Published Mon, Feb 5 20245:03 PM ESTUpdated Mon, Feb 5 20245:24 PM EST

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

Just how much bigger will Nvidia get in 2025 has emerged as a key among investors, even as the stock finished Monday at its third consecutive record high close. There are lots of price target hikes out there, including ours. Goldman Sachs on Monday planted its flag in the camp of 2025 optimists — simultaneously arguing against a pillar of the Nvidia bear case and raising its price target to $800 per share from $625. The new Goldman price target — which implies nearly 15.5% upside from Monday's — isn't even the highest on the Street. Rosenblatt Securities is at $1,100 and there are others even higher. We're also raising our Club price target on Nvidia to $750 from $600. We're being a little more conservative than Goldman, with plans to consider whether further adjustments are needed around Nvidia's earnings report later this month. One of the lowest Nvidia price targets belongs to DA Davidson at $410 per share. The firm initiated coverage of Nvidia with a hold rating in January, arguing financial estimates for the company in 2025 and beyond were too lofty. On Monday, shares of Nvidia rose 4.8% to an all-time high of $693.32 each — bucking a downtrend for the three major U.S. stock benchmarks. Nvidia has already gained 40% year to date. It's the best-performing S & P 500 stock this year as it was in 2023 when it more than tripled in value. NVDA 1Y mountain Nvidia's stock performance over the past 12 months. Part of Monday's move can be attributed to Goldman no longer projecting Nvidia's data center revenue — its largest segment and home to artificial intelligence chip sales — to drop off in the second half of this calendar year 2024. According to Monday's note to clients, the analysts cited several reasons why Nvidia should see "consistent growth" through at least the first half of 2025. Large, longtime Nvidia customers — hyperscalers such as Microsoft and Amazon — keep spending heavily on generative AI initiatives, Goldman noted, while the universe of chip buyers is expanding to include smaller cloud players and governments. Nvidia's plan to release a new AI chip each year also adds to the sustainability of data center growth, the analysts argued. And, after pronounced shortages and strong demand last year, the supply picture is improving, too. "I don't know when the data center is going to stop," Jim Cramer acknowledged Monday. However, our "own it, don't trade it" designation for Nvidia stock reflects our long-term confidence in the company to remain a leader in AI technology. Inherent in our view is a recognition that the blistering growth rates Nvidia began reporting last year amid booming investment in generative AI will moderate and that a so-called digestion phase, in which new orders for its chips slow down, may eventually transpire. Predicting when that will happen is challenging and wouldn't necessarily mean relinquishing Nvidia's leadership position. After all, the semiconductor industry is historically prone to boom-and-bust cycles. Fiscal vs. calendar year explained Nvidia's fiscal years — which run from January to January — are roughly one year ahead of the calendar years. So, on Feb. 21, when Nvidia reports its fiscal 2024 fourth quarter, the results will cover the three months from November 2023 to January of this year. All references to years in Goldman Sachs' note are calendar years, so the analysts can compare apples-to-apples when talking about Nvidia and its industry peers. However, the longer the current boom in AI investment holds, the more time Nvidia's small, but fast-growing software business has to mature and develop into a more material revenue stream that can help smooth out the cyclical nature of hardware sales. This remains a somewhat underappreciated opportunity among investors. At this point, we agree with Goldman Sachs' view about Nvidia's 2025 setup. As we wrote Friday, the robust capital expenditures guidance and general AI commentary from fellow Club holdings Microsoft, Amazon, Meta Platforms and Google parent Alphabet during their quarterly earnings calls paint a favorable picture for Nvidia. Those five and Apple make up our Significant Six mega-cap tech names. Taiwan Semiconductor Manufacturing Company , TSMC for short, also upped its multiyear AI chip revenue projection this earnings season, another encouraging development for Nvidia and even rival Advanced Micro Devices, which launched an AI-focused chip to compete with Nvidia late last year. TSMC is the third-party chip manufacturer for Nvidia, AMD as well as other companies like Apple. One lingering obstacle for Nvidia is its ability to sell AI chips to customers in China — due to n ational security-driven export restrictions imposed by the U.S. The American government's rules are designed to keep these powerful semiconductors out of the hands of the Chinese military. However, access to the Chinese corporate market would help Nvidia sustain growth in the years ahead. To that end, the company is expected to begin mass production of AI chips for Chinese customers that comply with the latest U.S. regulations in the coming months. Nvidia's earnings report and conference call scheduled later this month will likely feature discussion about management's latest thinking about its China business. (Jim Cramer's Charitable Trust is long NVDA, MSFT, META, AAPL, AMZN and GOOGL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Nvidia CEO Jensen Huang speaks during Mobile World Congress Americas in Los Angeles on Oct. 21, 2019.

Patrick T. Fallon | Bloomberg | Getty Images