Nvidia Wows Investors With a New Chip and a Better Outlook. What Wall Street Thinks.
Nvidia made the first AI supercomputer for level 5 robotaxis a few years ago.
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Shares of graphics processor maker Nvidia rallied Tuesday for a second straight day, after big news came out from its annual graphics technology conference and an investor day.
Nvidia (ticker: NVDA) stock climbed 2.7% to $624.69 in late afternoon trading as the PHLX Semiconductor index, or Sox, retreated 0.3%. Nvidia has surged 129% in the past year, while the Sox gained 99%.
The news came Monday in two parts. First, at the conference, CEO Jensen Huang announced the company’s first foray into central processing units, or CPUs, designed for data centers. And second, chief financial officer Colette Kress told investors the company expects to report sales above its $5.3 billion guidance for the current quarter, and log an additional $100 million in sales from its new line of cryptocurrency mining products.
Most analysts reacted positively to the day.
Truist Securities analyst William Stein said the company’s revised forecast for the quarter suggests there is likely more upside later in the year. Stein noted that Nvidia executives expect demand for its videogame chips will continue to rise, and shortages of the processors that have been an issue since launch will begin to ease.
For Raymond James analyst Chris Caso, the attention grabber was the company’s entry into the CPU market with its high-end data-center chip called Grace, set for release in 2023. “While we believe this first product is targeted toward a high-end nice of the CPU market it provides an indication of where Nvidia is going,” he wrote. The analyst said his team expects Nvidia is trying to make the most of Intel ‘s difficulties and take a bigger piece of the data-center market.
New Street Research analyst Pierre Ferragu took a different view. “We call [its] bluff,” he wrote in a Tuesday note. To Ferragu, the data-center chip can only capture a small piece of business tied to Nvidia GPUs (graphics processing units) in big data-center systems. The chip won’t expand the addressable market, and the potential opportunity is “an order of magnitude smaller” than the GPU business.
BMO Capital Markets analyst Ambrish Srivastava wrote that the company’s videogame efforts look to be getting even stronger. Srivastava noted the launch of its Ampere chips has been twice as fast as the prior generation of chips. With the Ampere cards, gamers tend to prefer the more expensive models this upgrade cycle, which bodes well for Nvidia: Srivastava’s data indicates 85% of current Nvidia customers have yet to upgrade.
Though Nvidia is widely known for the semiconductors it makes, software is an important part of the company’s strategy, too—even more so after Monday’s announcements.
Atlantic Equities analyst Ianjit Bhatti: “NVIDIA is now increasingly looking to monetize software directly and has announced NVIDIA AI Enterprise, a suite of AI and data analytics software for enterprise customers. NVIDIA AI Enterprise will either be available as a perpetual license with an annual support fee or as a subscription offering, with management guiding that enterprise software represents a multibillion-dollar opportunity for the company.”
In a note Tuesday, Oppenheimer analyst Rick Schafer said his team is now viewing the company’s auto revenue as its “newest pillar for growth.” Though the segment fell 23% last year, the declines were mainly because of the Covid-19 pandemic, Schafer wrote. He pointed out that executives highlighted an “$8 billion revenue pipeline by 2027” with a sharp rise in by 2024. The company’s deal with Mercedes will likely lead to similar arrangements with other auto makers.
Write to Max A. Cherney at [email protected]
