NVIDIA stock forecast: more profits on the cards?

How has the NVIDIA stock forecast been affected by the graphics processors shortage?

The NVIDIA stock forecast has been robust in recent months, despite warnings from the company that a dire shortage of graphics processing units (GPUs) is expected to last until the end of 2021. This has been driven by a multitude of factors: heightened demand as top manufacturers release new consoles, production disruption because of COVID-19 and the dizzying bull run that was seen in the cryptocurrency markets.

To understand why NVIDIA stock price predictions are so upbeat, take a look at its financials covering the three months to 2 May. Overall, revenues came in at $5.66bn – that’s up 84% from the same period a year earlier. Breaking this down further, we can see that revenue in NVIDIA’s two core divisions – gaming and data centres – delivered blockbuster growth of 106% ($2.76bn) and 79% ($2.05bn)respectively.

As analysts make upbeat NVIDIA stock price forecasts for the months ahead, the company’s CEO Jensen Huang described the period as a “fantastic quarter, with strong demand for our products driving record revenue”.

He added:

“NVIDIA RTX has reinvented computer graphics and is driving upgrades across the gaming and design markets. Our partners are launching the largest-ever wave of NVIDIA-powered laptops. Across industries, the adoption of NVIDIA computing platforms is accelerating.”

The rise in NVIDIA’s stock price hasn’t been without challenges, however. Gamers have struggled to get their hands on graphics cards in the GeForce range, which aim to enhance the visuals and performance for top-flight titles. That’s because they’ve faced competition from those who want to snap up GPUs for cryptocurrency mining, giving them a greater chance of producing new ether coins in particular.

Although NVIDIA does have its own range of graphics cards for crypto miners, it says its GeForce range is designed for use by gamers only. To make them less attractive for miners (and to ease bottlenecks that are preventing exasperated players from getting their hands on one), NVIDIA announced in May that it is  cutting hash rates in half. That’ll make it much harder to generate new ETH using one of these products. 

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NVIDIA stock forecast 2021: The story so far

NVIDIA’s stock price has been on a tear over the past 12 months. It stood at about $350 as of 1 June 2020. By the end of May 2021, it stood at $620 – a 77% increase on the year before. The NVDA stock price also recently hit record highs of $648.57.

We performed in-depth analysis of the NVIDIA stock forecast last autumn. The high-end estimate then had suggested we would see the share price hit $700 by November 2021. With demand for its products remaining exceedingly healthy, you could argue that this target now looks rather conservative to say the least.

The decision to ensure that graphics cards can be used for specific purposes, without clipping the wings of those who want to experiment, could prove to be an astute decision. One challenge for investors is that it’s very difficult to know exactly how much of NVIDIA’s income is related to the production of new cryptocurrency – and whether we could see demand plummet in the event of a bull market gripping the likes of bitcoin and ether.

One factor that informs NVDA stock predictions is that, at least when it comes to the stock market, this is a company that firmly appears to be ahead of the pack. NVIDIA’s share price gains far exceed the index that brings together a basket of semiconductor manufacturers – and this company’s stock has also outperformed the flagship S&P 500.

NVDA price history

Date Close Change Change(%) Open High Low
Aug 18, 2022 187.35 5.35 2.94% 182.00 188.53 181.56
Aug 17, 2022 181.50 -5.99 -3.19% 187.49 187.74 181.35
Aug 16, 2022 188.40 -0.73 -0.39% 189.13 191.30 184.90
Aug 15, 2022 190.10 4.33 2.33% 185.77 191.52 184.93
Aug 12, 2022 187.22 6.54 3.62% 180.68 187.30 179.43
Aug 11, 2022 179.63 -1.69 -0.93% 181.32 186.94 178.73
Aug 10, 2022 180.56 10.61 6.24% 169.95 181.07 169.54
Aug 9, 2022 169.83 -5.25 -3.00% 175.08 175.36 167.16
Aug 8, 2022 176.31 -13.86 -7.29% 190.17 191.14 172.33
Aug 5, 2022 189.38 -3.24 -1.68% 192.62 192.72 186.58
Aug 4, 2022 192.07 3.83 2.03% 188.24 192.55 187.50
Aug 3, 2022 187.90 6.50 3.58% 181.40 189.54 181.25
Aug 2, 2022 181.18 -0.77 -0.42% 181.95 189.24 180.56
Aug 1, 2022 184.40 3.49 1.93% 180.91 188.34 179.84
Jul 29, 2022 181.70 1.84 1.02% 179.86 182.29 176.86
Jul 28, 2022 178.91 3.05 1.73% 175.86 181.26 174.31
Jul 27, 2022 177.11 7.55 4.45% 169.56 179.24 168.16
Jul 26, 2022 168.09 -1.47 -0.87% 169.56 169.71 164.42
Jul 25, 2022 169.26 -4.01 -2.31% 173.27 174.44 166.40
Jul 22, 2022 172.74 -4.58 -2.58% 177.32 179.50 171.26

FAQ

Analysts appear to be exceedingly bullish when it comes to NVDA’s stock price – and with good reason. NVIDIA has made a concerted effort to ensure that any collapse in the crypto world doesn’t affect its underlying financials. And there’s still plenty of untapped potential when it comes to the data centre side of its business. It’s also been confirmed that Nintendo plans to use NVIDIA chips in the new version of its long-awaited Switch console, which is expected to hit shelves later this year. Unfortunately, all of this raises questions of whether gamers will end up facing a long wait before new hardware is in their living rooms.

According to CNN Business, 30 analysts now have a buy rating on NVIDIA’s stock, while six believe it will outperform the market over the next 12 months. Five analysts recommend holding on to shares, while just one has a sell rating in place.

Generally speaking, the attitude towards NVIDIA appears to be positive for the next year – indicating that we won’t see demand for these chips dry up any time soon. The median view from analysts anticipates that there will be a 12.8% surge in this stock price between now and May 2022 to $700 (this point was a high-end estimate just six months ago). The new high-end estimate stands at $800.81, up 29%. Of course, not everyone is as upbeat, and a low-end estimate of $440 is currently in force.

It has been confirmed that there is going to be a four-for-one NVIDIA stock split after a vote by the company’s board. This will come into force in July, assuming that shareholders give their approval at an upcoming annual meeting on 3 June.

NVIDIA’s share price leapt higher on the news, and it’s hoped that this will ensure that the company’s stock is available to a greater cross-section of employers and investors. Overall, it would mean that there would be four billion outstanding common shares in circulation.

Stock splits do not have an impact on a company’s market cap, but it can enhance liquidity.

It’s difficult to know for certain how the NVIDIA stock forecast for 2025 is shaping up. But as cloud computing and artificial intelligence continue to gain importance, the company could be well placed to capitalise on technological shifts. Keeping an eye on its product pipeline could be a good move for investors, as future growth will hinge upon whether NVIDIA manages to stay ahead of rivals.

FURTHER READING: Tencent stock forecast: strong profits, but major concerns

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