Can Nvidia Stock Hit $200 in 2024?

Over the last two years, the hype around the artificial intelligence (AI) boom has led to incredible operating momentum for Nvidia (NASDAQ: NVDA), the company that designs and manufactures most of the industry's chips. But while business is roaring, the company's stock price seems to have hit a roadblock. Let's discuss why this might be happening and determine whether Nvidia's shares can hit $200 before the end of the year.

Nvidia's rocket-ship rally fades

With shares up by around 2,450% over the last five years, Nvidia has been a rewarding investment for its long-to-medium-term shareholders. However, the thesis is beginning to unravel, as strong operational results are no longer impressing the market as much as before.

Second-quarter revenue soared 122% year over year to $30 billion, driven by massive demand for Nvidia's data center graphics processing units (GPUs), which help run and train AI algorithms. The company's bottom line also remains buoyant, with operating income jumping 174% year over year to $18.6 million. Management expects the release of new AI hardware products based on the faster and more efficient Blackwell architecture to stimulate client demand in 2025 and beyond.

Nvidia's board also approved a whopping $50 billion worth of share repurchases in the quarter, which can boost investors' claim on future earnings by lowering the number of shares outstanding.

However, while these are objectively good results, Nvidia's split-adjusted stock price has fallen around 10% since the release on Aug. 28, suggesting many market participants think the operational momentum is unsustainable.

Storm clouds gather over the AI industry

There are several reasons why investors might take Nvidia's current results with a grain of salt. For starters, the consumer-facing software side of the generative AI industry is yet to prove its monetization potential. For instance, analysts at Goldman Sachs worry that today's AI systems simply aren't designed to solve problems complex enough to justify their costs.

And while the technology behind large language models (LLMs) like ChatGPT continues to improve, that doesn't necessarily mean they will become easier to monetize because of competition from free, open-source rivals like Meta Platforms' Llama or Elon Musk's Grok.

There is a growing risk that AI could follow the pattern of previous hype cycles like the internet or electric vehicles, where corporations overbuilt capacity in anticipation of consumer demand that didn't materialize quickly. If this happens with generative AI, the market for Nvidia's pricey data center hardware could plateau or decline in the near term -- even if the technology becomes widely adopted over the coming decades.