Semiconductor company Nvidia (NASDAQ: NVDA) has been one of the hottest stocks on Wall Street since the launch of ChatGPT sparked the artificial intelligence (AI) boom. In fact, Nvidia shares surged 910% during the last two years, making it the best-performing member of the S&P 500 (SNPINDEX: ^GSPC). That price appreciation also led to a 10-for-1 stock split earlier this year.
Last week, S&P Global saidNvidia will join the blue-chip Dow Jones Industrial Average (DJINDICES: ^DJI) on Nov. 8. Stock selection is not governed by specific rules, but the Index Committee generally selects companies that meet three criteria: They usually have excellent reputations, exhibit sustained earnings growth, and are followed by a large number of investors.
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Importantly, Wall Street is still overwhelmingly bullish on Nvidia despite the recent run-up in its share price. Indeed, among the 64 analysts that follow the company, 92% rate the stock a buy. Moreover, the median price target of $150 per share implies 11% upside from the current share price of $135.
Here’s what investors should know about Nvidia.
Central processing units (CPUs) can handle complex computing tasks like artificial intelligence (AI), but graphics processing units (GPUs) are better suited to such workloads because they can perform technical calculations faster and more efficiently. Nvidia dominates the market for data center GPUs, and its revenue share in AI accelerators exceeds 80%.
Importantly, numerous analysts expect the company to maintain its market share for at least two to three years. One reason for that confidence is CUDA, a robust ecosystem of software development tools that Nvidia has been building for nearly two decades. CUDA streamlines data preparation, model training, and application development across various AI use cases, including conversational chatbots, content generation, and autonomous machines.
Another reason analysts expect Nvidia to maintain its dominance in AI accelerators is its participation in other hardware verticals. For instance, Nvidia is the market share leader in AI networking gear, and it recently introduced its first data center server CPU. That lets the company build tightly integrated AI systems with a lower cost of ownership that those stitched together with products from multiple vendors, according to CEO Jensen Huang.
In May, Toshiya Hari at Goldman Sachs wrote, “We believe Nvidia will remain the de facto industry standard for the foreseeable future given its competitive advantage that spans its hardware and software capabilities, as well as the installed base and ecosystem it has built over multiple decades, and the pace at which it is and will be innovating over the next several years.”
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