Nvidia {{ m-tag option="price" ticker="NVDA" currency="USD" }} has experienced a remarkable surge in its stock price, rising by 760% since the start of 2023. This surge can be partly attributed to a 10-for-1 stock split completed on June 7, making the stock more accessible and liquid. Broadcom (NASDAQ: AVGO) also saw a significant increase, with its shares rising by 205% during the same period, and it plans a similar stock split on July 12.

Nvidia's High Valuation

‍

Before its split, Nvidia was the fourth-most expensive stock in the Nasdaq-100, a testament to its high valuation and the strong market demand for its shares. The primary objective of the stock split was to reduce the share price, thereby enhancing its liquidity.

‍

Despite its recent success, some analysts have raised concerns about Nvidia's future growth. New Street Research, for instance, projects a 35% rise in GPU revenues by 2025 but anticipates a slowdown in growth to the mid-teens beyond that. Factors contributing to this cautious outlook include potential reductions in hyperscale capital expenditures and growing competition from ASICs and AMD (NASDAQ: AMD).

Potential Derating Risk

‍

New Street Research warned of a possible derating, with Nvidia currently trading at 40x the next twelve months' earnings per share, compared to a low of 20x during slower growth periods in 2019. They value Nvidia at 35x earnings, consistent with multiples in late 2019 and early 2020. This translates to a target price of $143 by 2026, suggesting limited upside over the next two years. Their one-year target price for Nvidia is set at $135.

‍
‍
‍The information on mexem.com is for general informational purposes only. It should not be regarded as investment advice. Investing in stocks involves risk. A stock's past performance is not a reliable indicator of its future performance. Always consult a financial advisor or trusted sources before making any investment decisions.

‍