Nvidia (NASDAQ: NVDA) stock has had a wild several months. After hitting a new all-time high in June, share prices of the advanced semiconductor chip supplier dropped more than 30%. The stock then surged again, followed by another sharp drop and then a return to a new high-water mark. That volatility is the result of strong sales and earnings growth and high investor expectations, balanced against a high valuation.
One Wall Street analyst thinks the bullish investors have it right, and Nvidia stock can move higher by another 25% from its recent level. Melius Research analyst Ben Reitzes thinks investors should buy the stock and sees it worth $165 per share.
One big assumption for Reitzes’ bullish stance is his belief that Nvidia has built a competitive advantage that will last. In his new research note reported on in Barron’s, he wrote, “Nvidia’s greatest achievement is creating an infrastructure that works at all the big clouds down to the smallest — and can be monetized the fastest.”
That advantage includes a moat created with Nvidia’s CUDA software program kit. While the company releases its new, stronger chips like its latest Blackwell GPU (graphics processing unit), the proprietary parallel computing platform allows customers large and small to still make use of previously purchased Hopper series chips to accelerate the overall development of their artificial intelligence (AI) needs.
That makes Nvidia sticky to customers. They can continue to increase compute power for AI training while still getting returns from investments in earlier GPU products. And there is still plenty of spending for AI growth. In a recent podcast interview, Nvidia CEO Jensen Huang stated:
The entire computing technology stack is being reinvented. We have a trillion dollars’ worth of data centers that we have to modernize.
Nvidia has a hook in for much of that capital spending. It’s the thrust of why Reitzes thinks the stock still has plenty of room to run. And it’s a case that investors should buy into.
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Howard Smith has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
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