BofA analyst Vivek Arya reiterated a buy rating on Nvidia Corp. NVDA, increasing the price target from $700 to $800.
Chip designer to release quarterly results after closing on February 21.
The analyst will be looking for a notable but more measured upside of 3% to 5% or $0.5 billion to $1 billion from the reported fourth quarter ($20 billion consensus) and guided first quarter (consensus $20 billion of $21.4 billion), primarily due to additional supply gains offset by Chinese restrictions and some transition effects ahead of the planned B100 accelerator launch in the second half of 2024.
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Although a 3% to 5% rise would pale in comparison to the 10% and 22% rise and rise of previous quarters and perhaps disappoint some bulls, the more measured pace will also be seen as creating more ground fertile for continued growth in calendar year 2025. and beyond.
Beyond the quarterly EPS noise, Arya will focus on Nvidia’s flagship GPU Tech Conference (GTC), scheduled for March 18-20, where the company will likely showcase its pipeline and perhaps update the company’s annual TAM forecast. $250 billion AI accelerator.
Arya’s top pick, Nvidia, is supported by the potential for higher pricing with the upcoming B100 accelerator and the underappreciated strength of AI inference.
Although finding out relatively early, results from major US cloud customers suggest strong motivation to spend on generative AI (20% growth in cloud investments in calendar year 2024).
Microsoft Corp. MSFT AI services contributed 6 points of growth, meaning it is now a $4 billion annualized business for the Azure AI platform, which, integrated with infrastructure and according to the company’s data, now has 53,000 customers, 33% of whom are new to LTM, the analyst reported.
Alphabet Inc. GOOG GOOGLE Google uses AI to process more complex search queries, bringing capabilities to consumers through Gemini with platforms integrated into new handsets, Arya said.
Meta Platforms Inc. META AI-based advertising tools generate material revenue, and AI-based feed recommendations generate higher engagement. Enterprise adoption of generative AI is yet to take off and will become more prominent in calendar year 2025, with Nvidia benefiting from its wide availability on public clouds and unique partnerships, Arya noted.
The analyst expects the data center AI accelerator market to grow from $43 billion in calendar year 2023 to over $160 billion by calendar year 2027, probably an equal contribution from training/inference.
The analyst expects Nvidia to have a 90% share in training and reach above 50% share in inference. So far, most of Microsoft’s AI success has been in AI inference, likely primarily on the Nvidia GPU.
Nvidia’s SKU diversity ranges from ~$1.2k (RTX 40xx with tensor cores) to over $30k (H100); therefore, this will not leave any part of the IT market uncovered. Notably, Nvidia has already released its TensorRT-LLM, which doubles the speed of H100 GPUs and can support A100, L4, L40, and L40S SKUs, which is essential for performance improvement without hardware replacement.
Nvidia is one of the few large-cap tech stocks trading at 31x and 25x calendar year 2024 and calendar year 2025, below its 45% EPS CAGR for calendar year 2023-2025, has Arya said.
The analyst noted a trajectory toward over $40 pf-EPS power in calendar year 2027, over $160 billion in accelerator TAM and much more if TAM were to reach Advanced Micro Devices, Inc. AMD $400 billion level.
For Nvidia, Arya forecasts Q4 revenue and EPS of $20 billion (vs. consensus of $20.17 billion) and $4.48 (vs. consensus of $4.51) .
Price action: Shares of NVDA were up 5.00% at $661.77 at last check Friday.
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