• Raymond James lifts NVIDIA price target to $352 from $330, reiterating a Strong Buy.
  • Firm sees NVIDIA's CPU business accelerating, potentially hitting 5% of revenue by 2028 and becoming a global leader in CPU revenue.
  • Despite strong growth expectations, NVIDIA trades below the S&P 500 on a CY27 P/E basis, a discount the firm calls unjustified.

More Upside Ahead

Raymond James has raised its price target on NVIDIA Corp. to $352 from $330, maintaining a Strong Buy rating, according to a research note released Thursday. The firm's analysts argue that NVIDIA's CPU business is poised for a significant acceleration, potentially reaching 5% of total revenue by 2028 and even establishing the company as a global leader in CPU revenue.

The note highlights NVIDIA's entrenched position in artificial intelligence, a competitive moat that has allowed it to generate robust cash flows. Despite expectations of 20%+ growth, the stock currently trades below the S&P 500 on a CY27 price-to-earnings basis, a discount Raymond James believes is unwarranted given the company's leadership and financial strength.

"The market seems to be underpricing NVIDIA's potential beyond its core GPU business," the analysts wrote. "Our discussions suggest that the CPU opportunity could be a meaningful growth driver in the coming years."

Shares of NVIDIA have been on a tear recently, buoyed by strong demand for its AI-related products. The company's data center segment has seen explosive growth, and the expansion into CPUs could further diversify its revenue streams.

Raymond James also pointed to NVIDIA's "strong cash generation" as a key factor in their assessment. The company has consistently returned capital to shareholders through buybacks and dividends, even as it invests heavily in research and development.

We reached out to NVIDIA for comment on the new price target but did not receive an immediate response.

A Closer Look at the Numbers

The new target of $352 represents a potential upside of roughly 7% from current levels. The firm's analysis suggests that as the CPU business scales, it could add a significant revenue stream, but they also caution that execution will be key.

This is not the first time Raymond James has expressed optimism about NVIDIA. The firm has maintained a Strong Buy rating on the stock for the past year, aligning with the broader analyst consensus. However, the specific focus on CPU revenue sets this note apart.

The note comes amid a broader rally in tech stocks, with the Nasdaq Composite reaching new highs. NVIDIA's shares have surged more than 150% over the past year, outpacing the market.

As investors digest this new price target, many will be watching for NVIDIA's upcoming earnings report, due later this month. Analysts expect another strong quarter, but any guidance for the CPU segment will be closely scrutinized.

Implications for Investors

Raymond James's call adds to the chorus of bullish sentiment surrounding NVIDIA. With AI adoption accelerating across industries, the company is well-positioned to benefit. The potential in CPUs, if realized, could provide an additional hedge against any slowdown in GPU demand.

However, some market observers remain cautious about valuation. While the stock trades at a discount to the broader market on a forward basis, it still commands a premium on trailing metrics. The key question is whether NVIDIA can continue to deliver on its ambitious growth targets.

As one portfolio manager put it, "NVIDIA is a great company, but the stock is already pricing in a lot of success. We'll need to see continued execution."

For now, Raymond James's confidence provides a boost, but the market will ultimately decide. With a strong balance sheet and a dominant position in AI, NVIDIA appears well-equipped to face whatever challenges lie ahead.