Image courtesy of 123rf.com

Nearly a week after the last Nvidia (Nasdaq: NVDA) coverage, the stock reached an all-time high of $538 per share on Tuesday. The AI-powered stock has now tracked an 8.46% performance since the new year. 

A week ago, DA Davidson analysts forecasted a 15% downside risk to Nvidia, projecting a U-turn within the next two to six quarters as the AI hype balloon is popped.

“While we continue to believe that generative AI is the most important transformative technology since the Internet, we do not expect the same level of investment we saw in 2023 continuing beyond 2024.”

DA Davidson analysts

They set the average NVDA price target at $410 per share by the end of 2024 and beyond in the first two quarters of 2025. The more bearish forecast is expected, given Nvidia’s sharp public focus as the primary facilitator of the emerging AI generative ecosystem. 

Such investor enthusiasm, expressed by NVDA’s 233% YoY performance, is typically followed by a wind-down period. However, the new ATH suggests that Nvidia could also repeat triple-digit performance in 2024.

But what are the arguments for and against it?

Between Rate Cuts and Potential Recession

Even after the stronger-than-expected non-farm payroll (NFP) report, fed fund futures still price in the first rate hike for March at 63.77% probability. The “hot labor market” has fragile legs because these reports are regularly revised downwardly month-to-month. 

Further, the December jobs report showed a disproportionate number of jobs, over 52,000, coming from government-funded sources instead of the real economy. Unsurprisingly, the New York Fed updated its recession probability by treasury spread on January 4th, delivering a 62.9% recession chance for twelve months ahead.

(Click on image to enlarge)

Image courtesy of New York Fed

Even with the rate cuts to stimulate the economy out of the recession, Nvidia would see a loss of demand as consumer spending decreases. Although Nvidia effectively transitioned from a video gaming company to a data center company, that loss of demand would also result in reduced business investments in data centers.

Ultimately, the macroeconomic driver for NVDA’s performance in 2024 would depend on the recession’s severity if it unfolds in the first place. 

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