Nvidia Stock In Position To Climb As Chipmaker Remains Main 'Shovel Provider' In The AI Gold Rush, Says Goldman Sachs

Goldman Sachs added NVIDIA Corp NVDA to its conviction list on Monday, calling it the main "shovel provider" in the AI gold rush. 

What To Know: Nvidia shares were getting a lift from Goldman Sachs' positive commentary on the chipmaker's positioning in the AI space. The analyst firm believed Nvidia is positioned to take advantage of broadening demand as supply dynamics continue to improve.

"Look for NVDA to maintain its status as the accelerated computing industry standard for the foreseeable future given its competitive moat and the urgency with which customers are developing and deploying increasingly complex AI models," Goldman analyst Toshiya Hari said in a new note to clients. 

The analyst didn't see data center trends slowing down anytime soon. Hari noted Nvidia's data center sales nearly tripled on a year-over-year basis last quarter. This showed the company's GPUs became instrumental for hyperscale customers seeking greater compute power. 

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Nvidia also appeared to be positioned to better keep up with demand as supply constraints ease. The analyst highlighted recent commentary from Nvidia management in relation to addressing key bottlenecks with supply chain partners. 

SG&A costs weren't growing nearly as fast as revenue and Nvidia was selling more and more of its higher-margin products, Hari said.

"Look for continued healthy opex leverage ahead as the company continues to penetrate new markets and applications with its common GPU platform approach — all helping to support a recently announced $25bn share repurchase authorization," the Goldman analyst said. 

Hari believed the Street is underestimating the lift in gross margins that Nvidia could continue to see. Hari has a price target of $605 on Nvidia shares and sees the company's upcoming earnings report as a catalyst for continued upward share price momentum. In addition, constructive data points and industry commentary on AI spending could provide an additional boost.

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NVDA Price Action: Nvidia shares were up 2.93% at $448.07, at the time of writing, according to Benzinga Pro.

Photo: Courtesy of Nvidia.