The Nvidia (NASDAQ: NVDA) share price is currently $1,096. Last month, HSBC lifted its target price for the stock to $1,350 while maintaining its ‘buy’ rating.
The broker said the reason for the rise from its previous price of $1,050 was due to the expected evolution of Nvidia’s product range, more specifically its central processing unit and graphics processing unit (GPU)-based GB200. Its new target represents a 23.2% premium from its current price.
But that’s a drop in the water for a stock that has risen 127.5% alone in 2024. In the last five years, the Nvidia share price has risen a whopping 2,912.5%. £5,000 invested back then would be worth £150,625 today.
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That’s astonishing. But with HSBC predicting the stock to keep rising, is it time for me to hop in and buy some shares?
A merry May
The chipmaker’s share price rose 27.7% in May, largely down to the release of a strong set of Q1 results. For the period, revenue increased to a quarterly record of $26bn, a 262% jump year on year. Revenue for its Data Centre, which has been a key growth driver for the firm in recent years, climbed a massive 427% to $22.6bn.
Demand for Nvidia products doesn’t seem to be slowing. It has some of the biggest players in the world, such as Amazon, Tesla, and Meta, to name just a few, lining up to get their hands on its GPUs.
With that, analysts predict its earnings to keep getting better in the years ahead. By 2026, revenue is expected to rise to $156bn.
Take a step back
But where does that leave investors who are considering investing in Nvidia today? Its rise has been mighty impressive. But I do have my concerns.
Mainly, there has been talk about a bubble surrounding Nvidia at the moment. I can see why. It currently trades on a price-to-earnings ratio of 64.1. That’s higher than all of its competitors in the Magnificent Seven. The next closest is Amazon at 49.5. Similarly, its price-to-sales ratio, which is 34.2, is also considerably above the rest of its peers.
Many brokers are bullish on Nvidia going forward. However, broker forecasts are just that, they’re predictions. I’m cautious investors have been buying into the hype surrounding the company and driven the stock too high. That opens the door for large spells of volatility.
My move
I’ve said before that I’d steer clear of Nvidia at its current price. But with the business continuously beating expectations, it could be I’m wrong and the stock will keep soaring.
Even so, while it looks like Nvidia can’t slow down right now, it’s inevitable that at some point it will. I’m worried when that happens, we could see its share price sharply pulled back.
I won’t be buying Nvidia stock today. I already own shares so I’m sitting tight with the exposure I have at the moment while I ponder my next move.
