Semiconductor giant and tech investor Nvidia Corporation is making a huge bull run on Wall Street for institutional and retail investors alike. The stock, which is trading up over 1,700 percent over the past five years, hit an all-time high on Tuesday at $292. The milestone came after a 5 percent spike on Friday and continued momentum this week, with one analysts $400 price target.
The overwhelming catalyst in Nvidia’s push to all-time highs was an analyst from Evercore ISI’s C.J. Muse. In the note, Muse gave Nvidia a $400 price target, raising it by 33 percent from his previous $300 target, and reiterated his Buy rating for the stock.
Wall Street pounced after the publication of the huge price target raise, and the gains are still rolling in as it gets more exposure.
The main sectors Nvidia is profiting from are gaming, autonomous vehicles, and artificial intelligence. Autonomous vehicles and AI have seen fast global growth and as these segments have yet to come to maturity, there is even more potential for Nvidia on the horizon.
“NVDA continues to make a compelling case for long-term sustainable growth across all segments with a specific focus on large industry verticals including Gaming, HPC, Pro Visualization, Transport, Healthcare, and Autonomous Machines,” wrote Muse. “Very importantly, we view Nvidia as being on the cusp of a tipping point in the company becoming the AI standard platform.”
According to Muse, Nvidia’s early Artificial Intelligence market share will be the key driving factor in sustained growth.
The Bear Case
A number of analysts are a bit more conservative regarding Nvidia’s future, however. The stock currently has a consensus one-year target estimate of $297.21, and institutions are largely split on whether the stock is a Buy or a Hold.
The go-to criticism bears offer on Nvidia has been a cryptocurrency boom that is at its end. Nvidia’s graphics cards are used in the mining of cryptocurrency like Bitcoin and Ethereum. In media remarks back in August, CFO Colette Kress expressed that the original forecast for crypto-related sales in 2018 was overstated.
“Our revenue outlook had anticipated cryptocurrency-specific products declining to approximately $100 million, while actual crypto-specific product revenue was $18 million,” Kress said in prepared remarks. “Whereas we had previously anticipated cryptocurrency to be meaningful for the year, we are now projecting no contributions going forward.”
However, at even the high anticipation of $100 million, cryptocurrency-related sales account for just a small fraction of Nvidia’s revenue, which was reported at $6.91 billion for 2017.
Even negating the small impact that a waning cryptocurrency boom has had, there is still a strong bear case for the company. Just two months ago, in August, Citron Research and Andrew Left predicted a 20 percent drop in the stock. Left cited ten specific reasons for his short report. His reasons included the shifting outlook on cryptocurrency, but that was just a small factor.
According to Left, the key headwinds for the company’s stock price will be its high multiple valuation, and unseen innovations in AI and autonomous vehicles that are being largely ignored by the bull analysts.
One example is in Elon Musk’s own statements that Tesla’s self-developed chip is 10x better than what they were previously using from Nvidia.