Benefiting from the rapid growth of the AI industry, the semiconductor giant TSMC announced impressive third-quarter financial results last week. TSMC Chairman Mark Liu is full of confidence in the next 5 years, emphasizing the real existence of AI demand, which has boosted the stock price to a new high. At the same time, Nvidia, a key customer of TSMC, has also been positively impacted, with its stock price rising accordingly and reaching a new high in the market value yesterday (21st).
Nvidia Market Cap Surpasses 3.5 Trillion USD
According to data from Google Finance, Nvidia's stock price rose 4.14% on the 21st, closing at $143.71, in contrast to the declines in the S&P 500 and Dow Jones Industrial Average. Nvidia's market cap has surpassed $3.5 trillion for the first time, reaching $3.525 trillion, making it the second company to reach this milestone, closely following Apple's $3.595 trillion market cap, with a difference of only $70 billion.
TSMC: Nvidia Orders Fully Booked Until Next Year
Nvidia's strong stock performance may be related to the information revealed by TSMC during its earnings call last week. TSMC stated that Nvidia's orders have been fully booked until 2025, and with the new product GB200 expected to begin mass shipment by the end of this year, TSMC's revenue and profitability are expected to grow significantly in 2025. This major positive news immediately boosted the stock prices of both TSMC and Nvidia, and also drove up related supply chain stocks.
Moore Investment Consulting analyst Kuo Chung-cheng pointed out that with the optimistic sales outlook for the GB200 chip, the revenue, profitability, and stock prices of the AI supply chain are expected to reach new highs, becoming a group of stocks to watch in the future. This also reflects the market's optimistic attitude towards the demand for Nvidia's next-generation AI processor Blackwell.
Another factor driving the rise in Nvidia's stock price may be the upcoming earnings release of its major customer Tesla this Wednesday. The market expects that the positive outlook revealed in Tesla's report, which relies on Nvidia's GPUs for AI computing to train its driver assistance systems and the humanoid robot under development, could further boost Nvidia's stock performance.
Bank of America Raises Nvidia Target Price to 190 USD
In addition, analysts' upward revisions of Nvidia's target price have also been a reason for the stock price increase. On Monday, Susquehanna analyst Christopher Rolland maintained a positive rating on Nvidia and reiterated a target price of $160. He noted:
AI indicators remain robust, with capital expenditure corrections by hyperscale cloud providers supporting growth in the second half of the year and next year. However, the expected thresholds for most AI stocks have already been raised, and future guidance may need to be further improved to support the stock price.
Bank of America (BofA) has also raised its revenue and earnings per share (EPS) forecasts for Nvidia over the next three years, and increased the target price from $165 to $190, reiterating a "buy" rating. Based on the latest closing price of $143.71, Nvidia has an upside potential of 32.2%.
The key reasons for BofA's Nvidia target price increase include:
- Consolidation of leadership in the AI field: Nvidia's market share in the AI market reaches 80% to 85%, and the potential market size (TAM) of the AI industry exceeds $400 billion, indicating huge growth opportunities.
- Strong AI demand: Robust demand for AI and large language models, along with improved visibility of CoWoS and HBM supply, are driving future revenue and EPS growth.
- High free cash flow: Nvidia's free cash flow profit margin exceeds 45% to 50%, about twice the average level of other tech giants in the US stock market.
- Attractive valuation: Nvidia's price-to-earnings growth ratio (PEG) is 0.6 times, far lower than the average of 1.9 times for the other seven tech giants.
- Future market potential: BofA forecasts that the AI accelerator market will grow to $280 billion by 2027 and exceed $400 billion in the future.
With the official shipment of Blackwell, if the market accepts it smoothly and drives Nvidia's gross margin improvement, Nvidia's market cap may surpass Apple again.
