U.S. Markets closed

Boutique Research Firm Upgrades Nvidia, Says AI, Ray Tracing Will Drive Demand For Chipmaker

Wayne Duggan

After several years of major market outperformance, semiconductor giant NVIDIA Corporation (NASDAQ: NVDA) has traded mostly in-line with the market so far in 2019.

On Thursday, one analyst said investors can expect Nvidia to make another run higher in the near future.

The Analyst

Cascend analyst Eric Ross upgraded Nvidia from Hold to Buy with a $190 price target.

The Thesis

Nvidia’s inference technology coupled with artificial intelligence spending by cloud providers will create a perfect storm of demand for the chipmaker, Ross said in a Thursday upgrade note. (See his track record here.) 

Unfortunately, hese trends will likely not have a significant impact on Nvidia’s revenue numbers until the fourth quarter of 2019, Ross said — but added that investors can expect better visibility and positive commentary from management in the next two quarters.

The new Radeon 5700 and 5700 XT GPU releases from Advanced Micro Devices, Inc. (NASDAQ: AMD) will likely eat into Nvidia’s gaming GPU sales, the analyst said. 

Despite the near-term headwinds, Ross said Nvidia’s gaming business should get a huge boost from ray tracing in the years ahead.

“Ray tracing may not matter much now (as few games support it), but when the leading games use it it will all of a sudden become important." 

Nvidia is at least one generation ahead of AMD in ray tracing tech, Ross said. 

In the AI space, the analyst said CUDA is the gold standard among engineers — and AMD doesn’t have an answer.

Cascend had been bearish on Nvidia since May 2018 due to concerns over a breakdown in cryptocurrency mining demand. Now that the crypto bubble has burst, Ross said investors have a chance to safely enter one of the best growth stories in the hyperscale data center space.

Price Action

Nvidia shares were trading higher by 3.78% at $166.07 at the time of publication Thursday. 

Related Links:

Chipmaker Trader Sentiment Received A Major Boost From G-20

AMD Option Trader Betting The Rally Will Resume

Photo courtesy of Nvidia. 

Latest Ratings for NVDA

Date Firm Action From To
Jul 2019 Upgrades Hold Buy
Jun 2019 Initiates Coverage On Outperform
Jun 2019 Maintains Overweight

View More Analyst Ratings for NVDA
View the Latest Analyst Ratings

See more from Benzinga

© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.