Nvidia Eyes Continued Leadership in $90B Accelerator Market, Despite Recent Dip: BofA Analyst

BofA analyst Vivek Arya maintained a Buy rating on Nvidia Corp NVDA with a price target of 1,100.

Nvidia is down about -11%, underperforming the SOX and SPX since an all-time high of $950 on March 25 following its GTC tradeshow, Arya said. The current selloff marks the 9-time Nvidia stock has declined ~10% or more since ChatGPT’s launch in late 2022.

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On a fundamental basis, the analyst flagged investor concern around rising competition and reducing lead times for Nvidia GPU accelerators. 

While there is always the potential for near-term summer consolidation in Nvidia stock, Arya noted that the fundamentals are solidly on track, and periods of consolidation tend to set the stock up for strong moves later. 

Earlier today, Alphabet Inc GOOG GOOGL Google announced its Arm Holdings Plc ARM-based server CPU called Axion, which is an alternative to the x86-based CPU from Intel Corp INTC and Advanced Micro Devices, Inc AMD.

Since Nvidia does not sell any CPU to Google, Arya noted no implication on Nvidia, though he flagged a more competitive environment for Intel and AMD. 

Nvidia also has its ARM-based server CPU called Grace, but it’s bundled chiefly with its AI products and not typically sold stand-alone. 

Per Mercury estimates, ARM-based servers had ~ a 7% unit share in server CPUs exiting calendar year 2023, up from 3% at the start of the year.

Arya maintained his core view that Nvidia will continue to dominate the ~$90 billion calendar year 2024 accelerator market (rising to $200 billion by calendar year 2027) with 75%+ share, followed by 10-15% of the market in custom chips and remaining 10-15% spread across other merchant. 

Nvidia’s Blackwell product, with its leading training and inference performance and Nvidia’s strong enterprise presence, make Arya more confident in the company’s ability to maintain/gain share. 

Nvidia stock gained 214% in the last 12 months. Investors can gain exposure to the stock via VanEck Semiconductor ETF SMH and Global X Robotics & Artificial Intelligence ETF BOTZ.

Price Action: NVDA shares traded higher by 1.36% at $865.30 on the last check Wednesday.

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