Nvidia’s stock (NVDA) experienced a significant rebound on Wednesday, pushing the broader market higher. This surge followed comments from former Google CEO Eric Schmidt, who highlighted the immense potential for AI spending, particularly favoring Nvidia. Eric Jackson, the founder and portfolio manager at EMJ Capital, weighed in on the near- and medium-term outlook for Nvidia, painting a bullish picture based on Schmidt’s predictions.
In a video shared by Stanford University (now deleted), Schmidt asserted that major companies are poised to invest billions of dollars in AI data centers, with Nvidia, the leading provider of AI accelerators, capturing the lion’s share. Jackson estimated that if hyperscalers allocate $300 billion each to Nvidia over the next few years, as Schmidt suggested, Nvidia’s demand would outstrip supply for the next four years. He projected Nvidia’s net income in 2027 to reach $132 billion, translating to a price-to-earnings (P/E) multiple of 23. However, he stressed that these high-return stocks are inherently volatile, with substantial drawdowns. If the P/E multiple were to rise to 65, Nvidia’s valuation could skyrocket to $8.5 trillion, with a per-share value of $340.
Nvidia has been at the forefront of the AI revolution, spearheading advancements with its powerful AI accelerators. The company’s dominant position in the market, fueled by its early entry and comprehensive AI solutions, has solidified its leadership. Despite this dominance, analysts have cautioned about the possibility of an AI bubble bursting after three to five years. The ever-evolving nature of technology implies that Nvidia could potentially lead the next technological breakthrough.
Venture Capitalist Peter Thiel recently expressed his belief that AI will become “super dominant” in the next two decades, fundamentally altering the economic, cultural, and political landscape. While this long-term perspective highlights the transformative power of AI, the immediate test for Nvidia will be its second-quarter results, due to be released on Wednesday. Analysts anticipate earnings of 64 cents per share and revenue of $28.46 billion, a significant increase from the previous year’s figures. The market will be closely watching to see if Nvidia can live up to these expectations and further solidify its position in the burgeoning AI sector.
