Goldman Sachs has increased its one-year price forecast for Nvidia Corp. (NVDA  ) from $1,100 to $1,200.

Analysts Toshiya Hari maintains a 'Buy' rating after the chipmaker reported remarkable earnings for the first quarter (Q1) of the year.

Hari also highlighted that Nvidia's data center revenue growth surged 427% year-over-year. That was a key driver for this upgraded bullish outlook.

"We believe the pace of innovation at which Nvidia is moving will allow the company to sustain its competitive lead," Hari wrote in a note published on Thursday.

In sum, Nvidia's latest earnings report not only showcased its strong performance but also highlighted its potential for continued growth.

Strong Earnings And Future Guidance

Last quarter, Nvidia's revenue reached $26 billion, marking an 18% quarter-over-quarter increase and a 262% year-over-year growth. Looking ahead, Nvidia provided optimistic guidance for the current quarter, projecting revenue to reach $28 billion, which represents an 8% increase quarter-over-quarter and a 107% rise year-over-year, surpassing Wall Street expectations.

The earnings report addressed investor concerns about a potential slowdown in Data Center revenue in the latter half of 2024, according to Hari.

Goldman Sachs believes that Nvidia's upcoming product launches, including the H200, H20, B100, GB200 in Compute, and Spectrum-X in Networking, alongside strong demand for the H100, indicate sustained growth.

Additionally, the anticipated supply tightness for the H200 and the Blackwell generation products, particularly the GB200, further solidified the positive outlook.

Goldman Sachs Predicts Nvidia Surge: Bullish vs. Bearish Scenarios

Goldman Sachs offered an in-depth bull/bear analysis to evaluate Nvidia's share risk/reward potential.

The most bullish scenario envisions a 133% potential upside for the stock to $2,344, driven by a 100% year-over-year growth in Data Center revenue in 2025. This optimistic view estimates that Data Center revenue could reach $222.4 billion by 2025.

Conversely, the most bearish scenario suggests a 75% potential downside to $248, assuming a more conservative 40% compound annual growth rate (CAGR) in Data Center revenue, reaching $41 billion by 2025, reflecting that the current growth momentum in Generative AI does not sustain.

As downside risks, the investment bank included potential declines in Generative AI infrastructure spending, further restrictions on GPU exports, weaker demand for Gaming GPUs, delays in new product launches, and ongoing supply chain issues.

Goldman Sachs' Scenario Analysis On NVIDIA

"We believe risk/reward on the stock is favorable," Hari stated.

The updated price target of $1,200 is based on a 50x multiple of Goldman Sachs' normalized earnings per share (EPS) estimate of $24.00, up from $22.00.

Shares of Nvidia were up by over 7% during the premarket trading Thursday, and the VanEck Semiconductor ETF (SMH  ) was 3.3% higher.