1 Wall Street Firm Just Gave Nvidia Stock a $250 Price Target. Is It Time to Buy?

Nvidia (NASDAQ: NVDA) stock currently trades for around $155. However, Loop Capital just gave Nvidia a new price target of $250 per share. That indicates around 60% upside from today's price, but the implications of a $250-per-share stock are far greater.

If Nvidia's stock rose to that level, the company would be worth more than $6 trillion. There's never been a $4 trillion company, let alone a company valued at $6 trillion. However, when you examine the reasons behind Loop Capital's $250 price target for Nvidia, there's solid information supporting the thesis.

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Image source: Nvidia.

GPUs are becoming more widely used

Nvidia is benefiting from an artificial intelligence (AI) boom, as its graphics processing units (GPUs) are powering the models behind these AI innovations. GPUs excel at workloads that require immense computing power, as they can process multiple calculations in parallel. Furthermore, GPUs can be connected in clusters to amplify this effect.

Loop Capital analyst John Donovan stated that GPUs are becoming more popular for non-AI workloads. Currently, about 15% of the computing capacity today is non-CPU-based. However, he believes the figure will climb to a range of 50% to 60% by 2028. This presents a $2 trillion market opportunity for Nvidia.

So, Loop Capital isn't just blowing smoke; it's got real numbers to back it up. Those figures are projections, but they follow the path that legendary Nvidia CEO Jensen Huang has spoken about regarding computing's evolution.

With Nvidia being dominant in the data center GPU sector (most estimates have Nvidia at a 90% or greater market share), it will reap the lion's share of this continued growth.

Still, there is one item that Donovan cautioned investors on.

Nvidia's valuation hovers around its big tech peers

One caveat that Donovan gave in his analysis of Nvidia's stock is that it continues to trade for roughly 30 times forward earnings. While this mark has historically been expensive, most of Nvidia's big tech peers are also trading around this range despite having slower growth than Nvidia.

NVDA PE Ratio (Forward) data by YCharts

Take Apple, for example. Its stock traded at an average of 29 times forward earnings since the start of 2023, despite growing revenue at a maximum rate of 6% during that time frame.

Nvidia's growth is far more rapid than that, and it has the staying power to continue delivering its elevated growth levels. I think it's safe to assume that Nvidia can continue trading around 30 times forward earnings, unless something drastic happens with interest rates (they would have to rise significantly from today's levels).

So, is Nvidia a buy at today's levels? I'd say absolutely. There's still significant growth potential in the AI trend, as well as in the broader computing space. Nvidia is the clear market leader and is one of the best ways to capitalize on this computing buildout boom. Based on Nvidia's size alone, it will be challenging to deliver massive returns comparable to those in 2023 and 2024. However, I believe Nvidia can outperform the market, making it an excellent stock to buy right now.

Should you invest $1,000 in Nvidia right now?

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Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Apple and Nvidia. The Motley Fool has a disclosure policy.