Nvidia {{ m-tag option="price" ticker="NVDA" currency="USD" }} has experienced a remarkable surge in its stock price, rising by 760% since the start of 2023. This surge can be partly attributed to a 10-for-1 stock split completed on June 7, making the stock more accessible and liquid. Broadcom (NASDAQ: AVGO) also saw a significant increase, with its shares rising by 205% during the same period, and it plans a similar stock split on July 12.

Nvidia's High Valuation

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Before its split, Nvidia was the fourth-most expensive stock in the Nasdaq-100, a testament to its high valuation and the strong market demand for its shares. The primary objective of the stock split was to reduce the share price, thereby enhancing its liquidity.

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Despite its recent success, some analysts have raised concerns about Nvidia's future growth. New Street Research, for instance, projects a 35% rise in GPU revenues by 2025 but anticipates a slowdown in growth to the mid-teens beyond that. Factors contributing to this cautious outlook include potential reductions in hyperscale capital expenditures and growing competition from ASICs and AMD (NASDAQ: AMD).

Potential Derating Risk

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New Street Research warned of a possible derating, with Nvidia currently trading at 40x the next twelve months' earnings per share, compared to a low of 20x during slower growth periods in 2019. They value Nvidia at 35x earnings, consistent with multiples in late 2019 and early 2020. This translates to a target price of $143 by 2026, suggesting limited upside over the next two years. Their one-year target price for Nvidia is set at $135.

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