Nvidia Corp NVDA stock traded higher Wednesday, buoyed by its artificial intelligence moat. Analysts expressed their confidence in the chipmaker's AI prowess ahead of its 2Q results.
Raymond James analyst Chris Caso maintained a Strong Buy and raised the price target from $450 to $500. Caso raised estimates ahead of 2Q earnings.
A more modest beat and raise (vs. last quarter) and talk of visibility extending into 2024 should keep the stock going.
GPU demand is significantly outpacing supply on the AI spending boom despite mixed Cloud capex trends. H100 ramps are in the early stages, which should remain a tailwind to ASPs.
On the supply front, Taiwan Semiconductor Manufacturing Company Ltd TSM recently indicated that CoWoS supply could remain tight through the end of 2024.
As such, the current demand and supply imbalance will extend order visibility through the first half and see further upside to estimates as supply conditions ease.
Given AI/ML dominance, Software/Services opportunity, and upcoming Auto inflection, the valuation is justified.
Caso raised the 2Q revenue and non-GAAP EPS from $11 billion and $2.04 to $11.2 billion and $2.11. For 3Q his estimates changed from $11.9 billion and $2.20 to $12.6 billion and $2.39.
Caso's FY24 and FY25 EPS estimates go from $7.61 and $9.77 to $8.28 and $12.42, driven by higher Data Center revenue and gross margins.
His model shows Data Center revenue growing 115% to $32 billion in FY24 and 50% to $48 billion in FY25.
Caso expects NVDA to benefit from H100 ramps at Microsoft Corp MSFT, Amazon.Com Inc AMZN, and Alphabet Inc GOOG GOOGL Google's recently announced A3 supercomputer.
Demand from Oracle Corp ORCL and specialty Cloud providers CoreWeave and Lambda also appears strong.
In addition, A800/H800 (China) demand is likely accelerating ahead of potential restrictions.
TSMC's recent comments and Caso's checks in the supply chain point to extreme tightness in 3Q23.
Caso modeled Gaming revenue to grow Q/Q in 2Q and 3Q, driven by new product ramps and seasonal strength. The 40-series GPUs have an average 15% ASP premium, which is another tailwind.
In Auto, Caso sees an inflection in 2024 as revenue-sharing agreements with Mercedes and JLR begin to ramp.
Piper Sandler analyst Harsh Kumar reiterated an Overweight and raised the price target from $450 to $500.
Price Action: NVDA shares traded higher by 1.10% at $444.25 on the last check Wednesday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
|---|
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
