Nvidia shares set a record in defiance of China restrictions. Will the rally continue?

On Wednesday, shares of technology giant Nvidia rose more than 4% and ended trading at their highest level ever. Investors again believed in the company's prospects in artificial intelligence even despite export restrictions on chips to China. Analysts also say that even after the record, Nvidia's growth potential is not yet exhausted.

At the close of trading on Wednesday, Nvidia shares rose 4.3% to $154.3. This became their all-time record closing price. The quotes continued Tuesday's rally as they jumped 2.6%. Nvidia's market value now exceeds $3.7 trillion, making it the world's most valuable company: just ahead of Microsoft ($3.66 trillion), one of its biggest customers.

At a shareholder meeting on Wednesday, June 25, CEO Jensen Huang assured investors that demand for AI infrastructure remains strong and the industry is just at the beginning of its journey, reported Bloomberg. In addition, Huang called robotics the largest market for the company in terms of growth opportunities after AI: he estimated that together these areas represent trillions of dollars in development potential, reported CNBC.

The company's securities have already risen by more than 60% from their April minimum. A significant catalyst for the current growth was Nvidia's quarterly results, published back in May, and the reports of its largest clients - Microsoft, Meta, Alphabet and Amazon, which just showed the continuation of big spending on AI infrastructure, wrote Bloomberg. For the fiscal year, analysts expect revenue to grow 53% to nearly $200 billion, adds CNBC, citing LSEG data.

Investors aren't too concerned about the restrictions on chip exports to China just yet, either: the limits are unlikely to dampen the company's AI prospects, noted CNBC. In April, Donald Trump's administration imposed new restrictions, banning Chinese exports of the H20 chip that Nvidia developed to circumvent previous bans. Last month, the company said the changes would result in an $8 billion loss of revenue and a $4.5 billion inventory write-down, remembered CNBC. «The $50 billion Chinese market is effectively closed to U.S. industry,» Huang said at the time.

«I'm even more confident about Nvidia's growth prospects now than I was a couple months ago,» Michael Smith, a fund manager at Allspring Global Investments, said in a Bloomberg statement. He believes the race in artificial intelligence will continue through at least the end of 2025 and possibly into 2026.

«I remain optimistic at least for this year and next year,» Smith added. - Like everyone else, though, we don't know what will happen next. The stock doesn't seem overvalued, but any major company has a limit to growth. It will all depend on how long Nvidia's biggest customers continue to invest heavily in AI. If they start cutting budgets, there could be turbulence in the market pretty quickly.»

Loop Capital analyst Ananda Baruah on Wednesday reiterated a buy recommendation on Nvidia shares and raised their target price from $175 to $250. That's more than 60% above the closing level on June 25. It was also the highest estimate among all analysts, noted Yahoo Finance.

«It may seem incredible - that Nvidia's performance can continue to strengthen, but don't forget: the company remains essentially a monopoly in a key technology area and has serious pricing and margin power,» Baruah said in a note quoted by Yahoo Finance. Loop Capital estimates that the artificial intelligence chip market could reach $2 trillion by 2028.

Even despite the updated record, Nvidia's securities still look attractive on a number of valuation metrics, Bloomberg notes. They now trade at a multiple of 31 to expected trailing 12-month earnings - below the 10-year average and only slightly above the Nasdaq 100 Index's multiple of 27, though Nvidia's growth forecasts are notably higher. The company's PEG (price/earnings adjusted for growth) ratio of about 0.9 is the lowest among the Magnificent Seven.

With strong revenue growth and a relatively moderate valuation, Wall Street remains confident in Nvidia's prospects, Bloomberg notes. Nearly 90% of analysts tracked by the publication advise buying the company's securities, and their consensus target price suggests Nvidia's market value will rise another 13% from current levels.

This article was AI-translated and verified by a human editor