Nvidia (NVDA) Has a Long Way to Go, Smart Long-Term Investment

Nvidia stock has risen by 57 percent YTD. The stock has been reaching higher highs and closed near the $820 per share level on July 2 as chip makers endorsed its deal with chip designer Arm. After its YTD gains and the more recent positive catalysts, investors want to know how high the stock can go. What's Nvidia's (NVDA) stock forecast for 2025?

In September 2020, Nvidia announced a $40 billion acquisition of U.K. chip designer Arm. The acquisition is being probed by antitrust regulators in the U.S., Europe, China, and the U.K. Many chipmakers, including Qualcomm and Huawei, object to the merger citing potential concerns like Nvidia limiting the access to Arm’s technology and an unreasonable hike in prices.

In a step forward for the Nvidia-Arm deal, Broadcom supported the combination. Nvidia's stock price spiked by 5 percent on June 28. Broadcom CEO Hock Tan explained the rationale behind his company’s move. He said that Nvidia will invest in Arm’s technology and keep it open for all companies to use. MediaTek and Marvell Technology also extended their support for the deal. The endorsement by chip giants for the deal is seen as a positive step forward towards the business combination.

In May 2021, Nvidia reported its quarterly results, which were better-than-expected. Its revenues climbed by 86 percent YoY, while the EPS surged by 106 percent YoY. NVDA’s revenue guidance for the ongoing quarter was also above expectations. A combination of strong results and a robust outlook caused the stock to rise nearly 28 percent in over a month. Another factor that has supported the stock’s recent rise is the company’s announcement that it will go for a 4-for-1 stock split on July 19. A stock split for large companies usually increases their affordability for small investors, which increases their demand and drives the prices up.

Nvidia stock is being covered by 32 Wall Street analysts. Among the analysts, 29 have a buy rating and three have a hold rating for the stock, according to Market Beat. Analysts’ consensus target price of $679 implies a possible downside of 17 percent. However, analysts have been appreciating the chipmakers’ support for the Nvidia-Arm deal. A Citi analyst thinks that it's a "big step forward" and lifted the deal probability from 10 percent to 30 percent.

Wells Fargo boosted NVDA’s target price from $715 to $875 on June 23. The firm’s analyst sees Nvidia’s enterprise AI positioning as "unrelenting." Tigress Financial analyst Ivan Feinseth also thinks that the stock can go up to $920 in 12 months.

On June 22, Raymond James raised NVDA’s target price to $900 from $750. The analyst thinks that data center has started to reaccelerate.

Nvidia stock has been a darling for investors. The company pioneered GPUs (graphics processing units) to make video games more realistic. Nvidia is also making a strong move in chips used in driverless cars, supercomputers, data centers, and drug development. These technologies are at the cutting edge of the future. As AI is incorporated in all the aspects of future technology, Nvidia is expected to be the leader in this space. Besides, the company has strong partnerships with Amazon, Google, and VMware.

AI and cloud computing are expected to drive the sales for data center chips. As Nvidia expands into other industries, analysts are forecasting a CAGR of 11 percent over the next five years. According to AI Pickup, Nvidia stock is expected to reach $1,350 by 2025, which implies an upside of 65 percent from the current levels.

Along with its pending Arm deal, Nvidia is one of the best-positioned semiconductor companies to grow over the long term. The company is in the right place at the right time to take advantage of the secular tailwinds in many sectors at once like AI, gaming, and cloud computing. The strong demand and equally compelling business opportunity make Nvidia stock a buy.