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NVIDIA ( NASDAQ: NVDA ) has been an absolute powerhouse for investors over the last few years, but will its stock price continue to rise? Or has it reached the end of its rope?
Whenever a stock rises quickly, it's hard to tell if the rise will continue or if the company is already overvalued. NVIDIA's historical performance is impressive. If you purchased $100 of recently split stock NVIDIA at its IPO , it would currently be worth a lot. That isn't indicative of future performance, though. Many companies have jumped huge amounts only to fall out of the sky months later.
Luckily, NVIDIA is in a very good position in its market, which is only expected to grow over the next few years. NVIDIA's stock price will likely be between $90 - $200 in the next three years.
That said, this is a very broad estimate, and there is A LOT that will affect it. We'll take a look at those factors below and discuss NVIDIA's potential future stock price.
Key Points in This Article
- Beyond NVIDIA's performance, other factors like overall market conditions and investor sentiment impact its share price.
- A bullish scenario could lead NVIDIA shares being valued at $200 or more in the next three years
- Bearish scenarios that involve margin loss or a steep decrease in spending in AI data centers could lead to NVIDIA dropping significantly from its current price
- Make sure to grab a complimentary copy of our brand-new "The Next NVIDIA" report . It details three critical AI plays beyond NVIDIA and includes a full industry report on the most essential trends investors need to watch in the space.
Factors Affecting Stock Price
NVIDIA stock continues to be a very popular stock - and for good reasons.
There are many factors that go into stock price prediction. Let's examine what experts consider when they predict NVIDIA's future strike price.
NVIDIA's Business Outlook
NVIDIA's business outlook is currently very good, as it looks like demand for its GPUs will only continue to grow. Gaming isn't going anywhere, and NVIDIA will continue to hold a sizable market share in that sector. GPUs are also very good at processing data, including data needed to run AIs. It's expected that demand for strong GPUs will continue to grow into the future as more and more processing power is needed.
There is also a chance that emerging Markets will make use of NVIDIA's existing products, too. We've already discussed AI, but technologies like self-driving cars also fall into this category. These programs rely on quick processing speeds, which NVIDIA delivers on. There are likely future technologies that we haven't even dreamed of that will need to use NVIDIA's GPUs, too.
NVIDIA isn't relying only on these emerging markets, though. This company is constantly developing new products and improving on old ones. NVIDIA may break into the AI industry directly or develop specialized equipment for processing AI. NVIDIA's innovation is a key driver for innovation and NVIDIA does a lot of it!
Currently, NVIDIA has had tremendous revenue growth in the last few years. Their latest revenue earnings grew 262% over the last year. Their earnings per share is also on the rise. GAAP EPS reached $5.98, up 21% quarter-over-quarter and a remarkable 629% year-over-year increase.
Overall Market Conditions
When market conditions are poor, it is harder for every company to do good. NVIDIA is no exception. If market conditions take a turn for the worst, then it's likely NVIDIA will not do as well as originally expected!
Conversely, if the market performs better than expected, NVIDIA may also do well.
Of course, many things affect the market, and no one can predict it with 100% accuracy. However, looking at the market overall and the tech sector, particularly, can hint at how well NVIDIA may be expected to do.
Interest rates and similar economic controls can also affect the stock market (and NVIDIA). Lower interest rates generally make stocks a more attractive investment compared to bonds, potentially driving up NVIDIA's stock price. Inflation, on the other hand, can erode the value of future profits, potentially leading to a decrease in stock prices.
The tech industry is also quickly changing, perhaps faster than any other industry out there. For this reason, innovation constantly opens up new opportunities and shuts the door on others. It's up to NVIDIA to keep up with these changes and use these new opportunities wisely. For this reason, tech tends to be a bit more volatile than other industries. It simply changes very quickly, making NVIDIA a riskier investment.
Investor Sentiment
Stock prices are driven by a company's performance and by investors' perceptions of it. NVIDIA is no different. Even if the company is doing great, if investors think they smell smoke, it can lead to plummeting stock prices.
Analysts who follow NVIDIA can indirectly impact stock prices through their predictions. If a well-known publication suddenly publishes something bad about NVIDIA, it could be troublesome for its stock prices.
Luckily, many investors still love NVIDIA. It had a solid place in a growing industry, making it a potential growth stock.
Potential Scenarios
Experts consider all of these factors when predicting stock prices. However, they cannot predict everything!
Okay, but what does all this mean? Well, we've put together a few scenarios of how these factors might impact NVIDIA's growth.
Bullish Scenario
In a perfect world, NVIDIA's stock price could benefit from a stellar global market and a growing tech sector. When perfection rarely exists, here's what would need to happen for NVIDIA's stock price to rise as much as possible:
- Storing growth in core markets, like video games. Demand for GPUs would need to grow within NVIDIA's current core markets.
- Success expansion into new markets like AI would need to help NVIDIA diversify its income streams further.
- Launching of new products would need to propel NVIDIA's profit margins and increase investor confidence.
- A robust global economy supporting a thriving tech sector would be necessary. Often, discretionary spending and innovation decrease in poor economies, and NVIDIA needs both of these factors to remain high.
In this case, NVIDIA could easily see a stock price of $200 or more. In a perfect world, NVIDIA is a fantastic investment.
Bearish Scenario
In the worst-case scenario, NVIDIA could lose a lot of the growth it's made over the last few years. However, once again, a lot of things would need to line up for this to become a reality:
- Stagnant growth in core markets, like video games and data processing. Likely, this would be due to an economic slowdown.
- Lack of significant innovation, allowing competing companies to eat up more of the market share.
- Failure to effectively break into new industries, or a lack of new industries to break into, to begin with.
- A global economic downturn led to a decrease in spending and investment.
- Rising interest rates lead to bonds becoming a more attractive investment than stocks
- Negative investor sentiment. While this can be related to how NVIDIA is doing as a company, it doesn't have to be!
If too many “wrong” things happened, NVIDIA's price could drop well under $150. Many believe that NVIDIA is currently overvalued, and this scenario would prove them right.
The Conservative Prediction
Of course, reality is usually a mixed bag. Some good things happen, and some bad things happen. This leads to NVIDIA making some slight gains, but it likely won't outpace the market as a whole.
This could mean that NVIDIA performs just “okay” on the abovementioned factors. They could innovate somewhat but not produce anything much better than what they have now. The global economic situation could be so-so, leading to slower stock growth.
It's this scenario that is most likely to happen. In all likelihood, NVIDIA's stock price will be around $90 to $200 in 3 years, based on the current expect analysis. Of course, the other two scenarios could absolutely happen, but the odds are lower.
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