NVDA Stock Forecast: Can Nvidia’s Too-Good-to-Be-True Rally Go On?

You’re not alone in thinking you missed the Nvidia (NASDAQ:NVDA) rally. The stock just seems to keep going higher with no end in sight. And as shares attain new heights, it is only reasonable to think at some point NVDA stock has to return to earth.

And yet every day the never-ending rally never ends. An NVDA stock analysis indicates gravity will take hold at some point but it raises the question, does it really matter? If the long-term outlook for the stock is as good as some suggest, then a return trip from the stratosphere should be welcome.

Here’s a look at what investors can expect from Nvidia in the not-so-distant future.

An unstoppable juggernaut

The temptation to take money off the table is great. After more than tripling in value last year, NVDA stock is up another 73% so far in 2024, adding roughly $925 billion to its market cap since Jan. 2. And we’re only eight weeks into the new year! From its bottom in October 2022, Nvidia shares have soared 650%. At some point it has to come to an end, right? Right?!

Well, sort of. The stock is riding the tsunami of artificial intelligence (AI) demand. Its shares are leapfrogging the valuation of Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) to become the third-largest stock in the world by capitalization. It was always a foregone conclusion Nvidia would achieve a $2 trillion valuation. And now people wonder if it will soon join Apple (NASDAQ:AAPL) at $3 trillion.

Hedge funds, however, started selling down their positions early. In the fourth quarter, Joel Greenblatt at Gotham Asset Management reduced his stake by 16%, David Tepper at Appaloosa cut his 23%, and Cathie Wood slashed her holdings in her Ark Invest funds by more than 34%. Wood continues to sell off NVDA stock in 2024, cutting another 31% from her holdings. She now owns less than 80,000 shares from a peak of 1.3 million back in 2022. Did they sell too soon?

An unassailable vantage point

There is no reason Nvidia should stop growing, at least not for the foreseeable future. Demand for AI accelerators, including graphics processing units (GPUs) at data centers, continues unabated. Especially for hyper-scalers like Amazon and Microsoft (NASDAQ:MSFT), their needs are only escalating. 

As CFO Collette Kress told analysts, “the enterprise wave of AI adoption is beginning,” and its crest has not yet peaked. Nvidia is firing on all cylinders, and its earnings report last month only confirms that the business is still chugging along.

There is also no credible threat to Nvidia on the horizon. Both Advanced Micro Devices (NASDAQ:AMD) and Intel (NASDAQ:INTC) want to steal a piece of the action and likely will at some point. But especially in the AI market, they are not going to topple Nvidia from the throne in any meaningful way.

Although Nvidia’s chips cost more than comparable ones from the competition, the chipmaker’s ecosystem will keep most of its customers close to home. The Cuda platform integrates well with its chips making the tools easy to use while allowing customers to build out their own applications.

Be ready for the dip

Yes, one day NVDA stock will stall out. AI mania will ebb, sales will slow, and the stock will tumble. No company can continue growing at the pace Nvidia is today. It will fall and may even fall hard. But long-term investors should welcome any discount the market is willing to share.

That’s because AI is in the early innings of a long game. There is no telling how big the need will be. Some analysts talk about multi-trillion-dollar opportunities. Nvidia is a company that will just grow right alongside it. For bold investors who won’t be shaken out, any decline will represent a chance to scoop up even more stock at a lower price just before Nvidia begins the next leg of its journey higher.

On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.