Chip maker Nvidia is seeing shares rise after KeyBanc analyst John Vinh assumed coverage of the stock with a Buy rating.
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Based on Nvidia ‘s prowess in building chips for artificial intelligence, its powerful software that helps optimize its chips, and its potential to make money on the entire data center stack, a KeyBanc analyst upgraded the chip giant’s stock to a Buy rating.
Nvidia (ticker: NVDA) stock is up 3.7% to $583.19 in Thursday afternoon trading.
KeyBanc analyst John Vinh wrote in a note to clients Wednesday that Nvidia is in a unique position to transform the global demand for computing related to artificial intelligence into cash. Estimated by Vinh to be a market of $90 billion, data centers designed for AI and machine-learning tasks are one of the most complex challenges in modern computing, and thus one of the highest-value opportunities for chip companies.
“We think Nvidia is uniquely positioned to dominate and monetize these end-markets, where in aggregate represent a $90 [total addressable market],” Vinh wrote.
Vinh picked up coverage of the stock Wednesday with the equivalent of a Buy rating, and a $700 target price. Previously KeyBanc’s Weston Twigg covered the stock, and had a Hold rating on shares. Vinh’s target price is based on the company’s value at 48 times 2023 earnings estimates.
In the note, Vinh outlines his bullish view on several current debates investors are having about the stock.
On videogames, which saw considerable growth during the Covid-19 pandemic as people were stuck at home, there is an open question how demand for videogames—and the graphics chips that Nvidia is known for—will fare as more of the world is vaccinated. Vinh predicts that habits developed during the pandemic will likely remain, despite some slow down over the next year.
Videogames were Nvidia’s largest segment in fiscal 2021, contributing revenue of $7.76 billion. Its data-center segment generated revenue of $6.7 billion. Nvidia’s fiscal year ended in January.
Another ongoing debate is whether Nvidia’s bold intention to acquire Arm Holdings, a company that makes the intellectual property other companies use to design chips, will close. It would be a blow if the deal fails, but Vinh said Nvidia’s recently announced Arm-based processor demonstrates that it can make such chips without having to buy Arm itself.
Nvidia is set to report results Wednesday after the closing bell. The consensus estimate for per-share adjusted earnings is $3.28, on revenue of $5.41 billion.
Of the analysts that cover Nvidia, 35 rate the stock a Buy. Six analysts rate shares a Hold, and two have a Sell rating. The average target price is $659.13, which implies a return of about 14%.
Nvidia stock has gained 52% in the past year, as the PHLX Semiconductor index rose 66%.
Write to Max A. Cherney at [email protected]
