Is Nvidia Going to Crash in the Second Half of 2024? History Weighs in and Offers a Big Clue | The Motley Fool (2024)

The road ahead is likely to get bumpier for the world's leading artificial intelligence (AI) company.

Unless you've been living under a rock for the last year, you've probably noticed that the bulls are running wild on Wall Street. While a resilient U.S. economy has certainly played a role, the lion's share of the gains in the growth-focused Nasdaq Composite and benchmark S&P 500 can be attributed to the artificial intelligence (AI) revolution.

In simple terms, AI uses software and systems for tasks that humans would normally oversee or undertake. What makes AI special and gives the technology such wide-ranging utility is the ability of these systems to learn over time without human intervention. This can allow AI software and systems to become more proficient at tasks and perhaps even evolve to learn new skill sets.

Is Nvidia Going to Crash in the Second Half of 2024? History Weighs in and Offers a Big Clue | The Motley Fool (1)

Image source: Getty Images.

The broad-reaching appeal of AI excited the analysts at PricewaterhouseCoopers (PwC) enough for them to estimate that this innovative technology could add $15.7 trillion to the global economy by 2030. With dollar figures this large, there's room for multiple big-time winners.

For the time being, no company is more directly associated with the rise of AI than semiconductor colossus Nvidia (NVDA 2.48%).

The $64,000 question is: Can Nvidia keep the good times rolling, or is a potential crash around the corner?

Nvidia has scaled like no market leader before it

For a very brief period this month, Nvidia pulled the crown away from Microsoft and Apple to become the most valuable publicly traded company. That's no small feat when you realize that Nvidia's market cap stood at less than $360 billion when the curtain opened for 2023.

Pretty much the entirety of Nvidia's $3 trillion increase in market cap over the last 18 months and its recent need to complete a 10-for-1 stock split have been fueled by the popularity of its AI-focused graphics processing units (GPUs). In particular, the company's H100 GPUs have become the go-to chip for businesses looking to run generative AI solutions and train large language models in high-compute data centers. In terms of computability, Nvidia's chips haven't been surpassed.

On top of its first-mover advantages, Nvidia counts many of the country's most influential businesses as its top customers. Microsoft, Meta Platforms, Amazon, and Alphabet account for around 40% of Nvidia's net sales. It's a testament to Nvidia that leading tech companies are lining up to use its GPUs in their AI-accelerated data centers.

We're also talking about a company that's enjoyed otherworldly pricing power for its chips. Even with leading chip fabrication company Taiwan Semiconductor Manufacturing substantially increasing its chip-on-wafer-on-substrate capacity, which is needed for the packaging of high-bandwidth memory, Nvidia isn't close to meeting enterprise demand for its GPUs. Higher prices lifted its adjusted gross margin to a jaw-dropping 78.4% in the fiscal first quarter (ended April 28).

The cherry on Nvidia's sundae is that it's held onto its innovative advantages. With external competitors like Intel and Advanced Micro Devices aiming to go head-to-head with the H100, Nvidia is readying to roll out its next-generation AI GPU architecture known as Blackwell.

Is Nvidia Going to Crash in the Second Half of 2024? History Weighs in and Offers a Big Clue | The Motley Fool (2)

Image source: Getty Images.

Is Nvidia stock going to crash in the second half of 2024?

On paper, Nvidia can seemingly do no wrong. Wall Street's AI leader has blown past every revenue and profit forecast put in front of it for more than a year. Yet, despite this outperformance and blueprint scaling we've witnessed, the possibility of Nvidia's stock crashing in the second half of the year is within the potential range of outcomes over the next six months.

History is the single biggest factor suggesting Nvidia has a non-zero chance of crashing in the latter half of the year. Specifically, I'm talking about the history of next-big-thing innovations/technologies and valuation-based history.

Roughly three decades ago, the proliferation of the internet began changing corporate America's long-term growth arc. While there's no denying the internet was a game-changing innovation for businesses, it took time for this technology to mature and for businesses to figure out how they'd use direct-to-consumer channels to generate sales and profits.

Every next-big-thing innovation, technology, and trend that's come along since the internet has featured plenty of hype, big dollar figures, and a bubble-bursting event in its early stages. Whether we're talking about genome decoding, China stocks, nanotechnology, U.S. housing, 3D printing, cannabis stocks, blockchain technology, the metaverse, or the internet revolution of the mid-1990s, history conclusively shows us that all new trends and technologies need time to mature. Artificial intelligence is unlikely to be the exception to this unwritten rule.

Although Wall Street's leading businesses have no qualms about spending big on hardware for high-compute data centers, most companies lack a concrete plan as to how they're going to lean on AI to grow their sales and profits. This is consistent with previous next-big-thing innovations over the prior three decades and provides further evidence for why early-stage bubbles have occurred.

Is Nvidia Going to Crash in the Second Half of 2024? History Weighs in and Offers a Big Clue | The Motley Fool (3)

CSCO PS Ratio data by YCharts. PS Ratio = price-to-sales ratio.

The other history-based issue for Nvidia has to do with its valuation. In terms of its forward-year earnings multiple and price/earnings-to-growth ratio (PEG ratio), Nvidia isn't raising any red flags. But pull up its trailing-12-month (TTM) price-to-sales (P/S) ratio, and it's a completely different story.

Prior to the bursting of the dot-com bubble, Cisco Systems' and Amazon's TTM P/S ratios peaked in the high 30s to low 40s. Nvidia's peak TTM P/S ratio occurred a little over a week ago at virtually the same level (about 42). While history doesn't repeat itself to a T on Wall Street, it does have a tendency to rhyme. For market-leading businesses, Nvidia is currently in rarified (and likely unsustainable) territory.

Unfortunately, history isn't all that accurate at pinpointing when corrections and crashes will occur. While it's been spot-on for three decades when it comes to forecasting an eventual bubble-bursting event for next-big-thing innovations and technologies, it's anything but a guarantee that Nvidia's stock will crash during the second half of 2024.

While Nvidia's AI hardware could be quite successful over the long run, and its market cap might motor considerably higher, allowing history to be the investors' guide suggests Nvidia's road is likely to get bumpier, at the very least, through the end of 2024.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Sean Williams has positions in Alphabet, Amazon, Intel, and Meta Platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Cisco Systems, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Is Nvidia Going to Crash in the Second Half of 2024? History Weighs in and Offers a Big Clue | The Motley Fool (2024)

FAQs

Is Nvidia Going to Crash in the Second Half of 2024? History Weighs in and Offers a Big Clue | The Motley Fool? ›

While Nvidia's AI hardware could be quite successful over the long run, and its market cap might motor considerably higher, allowing history to be the investors' guide suggests Nvidia's road is likely to get bumpier, at the very least, through the end of 2024.

What is the Nvidia forecast for 2024? ›

Nvidia stock price stood at $134.91

According to the latest long-term forecast, Nvidia price will hit $250 by the end of 2024 and then $400 by the end of 2025. Nvidia will rise to $500 within the year of 2026, $600 in 2027, $700 in 2028, $800 in 2029, $1000 in 2030, $1100 in 2033, $1200 in 2035 and $1300 in 2036.

What is the stock price prediction for NVDA in 2025? ›

For 2025, Arcuri forecast Nvidia will generate revenue of $204 billion and earnings per share of $4.95. That compares with consensus estimates of revenue of around $157 billion and earnings of $3.57 a share, according to FactSet.

Is Nvidia going to bounce back? ›

Tony Wang, T. Rowe Price portfolio manager, joins CNBC's 'Squawk Box' to discuss Nvidia, tech spending, and more.

How high can Nvidia stock go? ›

Analysts are expecting the company's earnings to increase at an annual rate of 43% for the next five years. Based on its fiscal 2024 earnings of $1.21 per share, Nvidia's bottom line could jump to $7.24 per share after five years.

What will Nvidia be worth in 5 years? ›

Multiplying the projected earnings with Nvidia's five-year average forward earnings multiple of 39 suggests that its stock price could hit $2,266 per share (barring any stock splits or other events) after five years.

What is the price target for Nvidia stock in 2026? ›

The average Wall Street forecast for Nvidia's earnings in 2026 overall is $4.10 and the average price target on the stock is $126.24, according to FactSet.

What is the prognosis for Nvidia stock? ›

NVIDIA Stock Forecast

The 39 analysts with 12-month price forecasts for NVIDIA stock have an average target of 127.69, with a low estimate of 62 and a high estimate of 200. The average target predicts a decrease of -2.81% from the current stock price of 131.38.

What is NVDA high price target? ›

$200.00

What will Amazon stock be in 2025? ›

Earnings growth could drive higher prices for the e-commerce and cloud computing giant. Amazon stock could reach $200, $225, or even $250 per share in 2025.

Is Nvidia a strong buy now? ›

Nvidia has a consensus rating of Strong Buy which is based on 37 buy ratings, 4 hold ratings and 0 sell ratings. The average price target for Nvidia is $136.49. This is based on 41 Wall Streets Analysts 12-month price targets, issued in the past 3 months.

Will Nvidia stock split in 2024? ›

Nvidia ($NVDA) stock will undergo its sixth stock split with shares trading at one-tenth the price starting June 10, 2024.

Is Nvidia over or undervalued? ›

Since Nvidia's P/E ratio is nearly 74, the company would need to generate annual EPS growth of roughly 74% over the next five years to be undervalued today. Some investors could believe this lofty growth rate is quite possible. After all, Nvidia's EPS skyrocketed 629% year over year in the first quarter of 2024.

Should I keep my Nvidia stock? ›

Nvidia's AI-driven revenue soared in fiscal Q1 2025, boosting top-line growth by 262% year over year. The stock recently hit all-time highs, with a market capitalization of $2.85 trillion. Investors should consider waiting for a price correction before buying more.

What is the risk level of Nvidia stocks? ›

ESG Risk Score for Peers
NameTotal ESG Risk scoreG
IFNNF INFINEON TECHNOLOGIES AG154
NVDA NVIDIA Corporation146
TOELF TOKYO ELECTRON145
LRCX Lam Research Corporation145
1 more row

What is the stock market forecast for Nvidia in 2025? ›

Arcuri increased his sales and earnings estimates for Nvidia in calendar 2025 above Wall Street's consensus estimates. He now sees Nvidia earnings of $4.95 a share on sales of $204 billion next year, vs. sell-side estimates of $3.62 in earnings per share on sales of $161 billion.

What is the 12 month forecast for Nvidia? ›

NVIDIA Stock Forecast

The 39 analysts with 12-month price forecasts for NVIDIA stock have an average target of 127.69, with a low estimate of 62 and a high estimate of 200. The average target predicts a decrease of -2.81% from the current stock price of 131.38.

What will be the price target of NVDA in 2040? ›

Key takeaways:
20252040
Nvidia Stock Forecast (5% yearly growth)$933$2,038
Nvidia Stock Forecast (S&P 500 historical 11.13% ROI)*$988$5,346
Nvidia Stock Forecast (QTEC historical 15.2% ROI)**$1,024$9,854
Mar 20, 2024

What is the target price for NVDA? ›

Stock Price Targets
High$200.00
Median$133.00
Low$15.00
Average$130.92
Current Price$131.38

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