Nvidia(NASDAQ: NVDA) investors have been on a wild ride this year. The artificial intelligence (AI) chipmaker soared as much as 174% in 2024, as excitement about the rapid adoption of generative AI has captivated Wall Street and Main Street alike. With those gains, however, has come extreme volatility, as the value of this emerging opportunity remains uncertain.
In recent weeks, the stock reversed course, plunging as much as 25%. Fears about the state of the economy have called into question the staying power of AI and how much further Nvidia can grow from here. The stock has regained much of those losses, but the questions remain.
One analyst believes Wall Street is setting its sights too low.
Image source: Getty Images.
HSBC says Nvidia is a buy
HSBC analyst Frank Lee recently reiterated his buy rating on Nvidia stock and increased his price target to $145. That represents potential upside for investors of 14% compared to Tuesday's closing price. The analyst believes that Nvidia will report $30 billion in sales for its fiscal second quarter, generating revenue of $33 billion and $36 billion in the quarters that follow.
The analyst notes that spending to upgrade data centers is on track to continue into 2025, driven by strong demand for generative AI.
The analyst has obviously done his homework. The three biggest cloud infrastructure providers, Amazon Web Services (AWS), Microsoft Azure, and Alphabet's Google Cloud, which are Nvidia's biggest customers, have all been crystal clear about plans to increase their capital expenditure spending to meet the accelerating demand for AI. As the gold standard for AI processing, Nvidia is likely to be the beneficiary of much of that spending.
Furthermore, the company's biggest partners and rivals are reporting strong sales, which suggests Nvidia's results will be equally robust.
If the analyst's calculations are correct, Nvidia's revenue will top $125 billion in fiscal 2025, more than double the $61 billion it earned last year -- and marking its second consecutive year of triple-digit growth.
That's why Nvidia stock is a buy.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Danny Vena has positions in Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
