Nvidia stock is still attractive from a valuation perspective when compared to its peers, according to Melius.
Nvidia has rocketed to all-time highs, but investors should hold on a while longer as the company's next-generation Blackwell GPU will be a watershed moment, a note from Melius Research this week said.
Ben Reitzes, a managing director at Melius, bumped his Nvidia price target to $185, representing potential upside of 26% from current levels.
Reitzes believes Nvidia is approaching its Apple iPhone moment, and that selling now would be akin to selling Apple stock after it released the first generation iPhone.
"It's similar to the feeling around product cycles with Apple's iPhone some 15 years ago, just on a different scale. So, while it sounds strange, giving up on Nvidia here after its hit -- Hopper -- is like giving up on Apple at iPhone 1 or 2," Reitzes said, referring to the current generation Hopper chip.
Nvidia stock has been a tear ever since OpenAI released ChatGPT in November 2022. Since then, Nvidia has soared nearly 800% to become the largest company in the world, with a market capitalization of over $3.5 trillion.
Nvidia's Hopper and upcoming Blackwell GPU chips represent the foundation of artificial intelligence advancements, which are powering everything from AI chatbots like ChatGPT to text-to-video and self-driving cars.
"Big clouds, sovereigns and large enterprises are still more likely to invest more in this 'once-in-a-lifetime opportunity," Reitzes said.
And Nvidia's enviable position means big profits are in store for its investors, according to the note.
"We are not only excited about Blackwell driving upside to the street in 2025 -- and Rubin in 2026 -- but we are also increasingly optimistic that gross margins can snap back firmly into the mid-70s by mid-FY26," Reitzes said.
Nvidia could earn more than $5 per share in profits by 2027, which "looks conservative now," according to the note. Reitzes increased his revenue and profit estimates for 2025 through 2027 for Nvidia, citing higher gross margins and continued investments from cloud hyperscalers.
And at those profit levels, Nvidia stock looks attractive from a valuation standpoint.
"Even with a decelerating growth rate on huge numbers, Nvidia's CY2025 PEG ratio stands at about 0.8x on our estimates. This ratio is 33% less than Broadcom's and the lowest in the Mag 7 by a wide margin," Reitzes said.