Nvidia stock closes at record high as analysts laud plans for an Arm-based data-center CPU

Monday’s gains came on the first day of the chip maker’s weeklong GTC developers conference, where the company said its first-quarter revenue was trending better than expected and announced a new data-center CPU, code-named “Grace,” that is meant to compete with the dominant server chips of Intel Corp. INTC, -0.28% and Advanced Micro Devices Inc. AMD, +2.05%.

Grace uses technology that has never really previously caught on in data-center use, and comes from Arm Holdings PLC, which Nvidia announced back in September it wanted to buy from SoftBank Group Corp. 9984, +0.80% for $40 billion. Since the deal was announced, many have noted that getting regulatory antitrust approval for the purchase will be tricky.

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More than a dozen analysts increased their price targets on Nvidia stock Tuesday morning as a result of the product and forecast announcements. Many said they were surprised to see the push to build a new Arm-based product as the deal is seeking regulatory permissions, but liked the move nonetheless.

Citi Research analyst Atif Malik, who has a buy rating and a $660 price target, said the Grace announcement was positive “as it shows what Nvidia can deliver with or without Arm deal close.”

“That said, it is a complicated addition to the portfolio, ahead to the pending merger with Arm, which could make regulatory antitrust approval more difficult to obtain,” Malik said.

Susquehanna Financial analyst Christopher Rolland, who has a positive rating and a $700 price target, said Nvidia’s “message was clear” in its announcement of the Grace chip.

“Nvidia plans to invest heavily to accelerate ARM’s proliferation into the data center,” Rolland said. “The lines between Intel, AMD and NVIDIA blur further as we expect a different DC landscape in 2025.”

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Cowen analyst Matthew Ramsay, who has an outperform rating and a $675 price target, said that “with or without M&A,” Nvidia’s Grace announcement was a surprise.

“We firmly believed it was only a matter of time before Nvidia launched its own Arm-based CPU product; however, we did not expect it to be announced publicly while the Arm deal was under regulatory review,” Ramsay said. “At a time when industry players and regulators are taking a hard look at the controversial deal, we were surprised at the announcement despite our checks indicating development had been under way since before the Arm deal was announced.”

Evercore ISI analyst C.J. Muse, who has an outperform rating and a $675 price target, said that he see earnings of $14 or more a share in 2021 given the company’s report that demand is expected to outpace supply this year, even as supply is improving. Analysts surveyed by FactSet expect an average $13.34 a share in earnings in 2021.

“Overall, we view Nvidia as well-positioned as the enabler of industry revolution across verticals as we progress to the next waves of AI,” Muse said.

Jefferies analyst Mark Lipacis, who has a buy rating and a $680 price target, said that other announcements, like Nvidia’s collaboration with Amazon.com Inc.’s AMZN, +0.61% Amazon Web Services, new software products for business customers and new AI models supported his “2025 $50 EPS earnings power thesis.” In 2020, Nvidia reported earnings of $10 a share.

Of the 38 analysts who cover Nvidia, 31 have buy ratings on the stock, five have hold ratings, and two have sell ratings, according to FactSet. Of those, 14 hiked their price targets, resulting in an average price target of $654.47, up from a previous $642.85, according to FactSet data.

Nvidia shares have climbed 132% over the past 12 months. In comparison, the PHLX Semiconductor Index SOX, -0.17% doubled, while the S&P 500 index SPX, +0.33% rose 50%, and the Nasdaq Composite Index COMP, +1.05% gained 71%.