It has been a blowout year for Nvidia (NVDA). The chip giant’s relentless forward march has been boosted by strong macro driven performances from its two main breadwinners – gaming and data center – and an increasing focus on rising secular trends, including autonomous vehicle technology and artificial intelligence (AI).
It also completed the takeover of data specialist Mellanox and, pending regulatory approval, has the $40 billion acquisition of UK-based chip designer ARM lined up next.
It is the latter’s anticipated addition, along with its implications on Nvidia’s growing AI opportunity, which has Needham analyst Rajvindra Gill laying out the bull case for Nvidia.
Gill has a Buy rating on NVDA shares accompanied by a Street high price target of $700. Upside from current levels is a healthy 26%. (To watch Gill’s track record, click here)
Nvidia is currently hosting its week-long virtual GTC conference, and has already revealed a string of new developments, including a partnership with Glaxo Smith Kline’s AI lab to discover new medicines and vaccines, its intention to build the most powerful supercomputer in the U.K. with a focus on healthcare AI research, deep learning-based models used by AMEX to prevent fraud, and AI driven software to reduce the amount of data used in video calls.
It has also brought Nvidia’s increasing reliance on ARM into sharp focus with the announcement of a new type of processor called a Data Processing Unit (DPU).
The Blue field-2 DPU combines 8 64-bit A72 Arm cores and Mellanox ConnectX-6 NIC. The cutting-edge data-center-on a chip is designed to unburden critical networking, storage, and security duties from CPUs.
Gill notes that with the new processors in tow, Nvidia's data center TAM (total addressable market) will be increased from $50 billion to $100 billion by 2024.
The analyst expects AI to “inevitably change every aspect of business and life,” and further said, “We believe NVDA is at the forefront of this trend with its vast hardware and software portfolio. With the acquisition of Arm, we believe NVDA becomes ubiquitous in the semiconductor industry, as it will offer all three processors (CPU, GPU, NPU) to address the AI revolution. We believe the earnings multiple is justified by climbing demand for cloud storage, both at hyperscaler and enterprise/verticals customers, driven by the stay-at-home economy.”
Gill might be Wall Street’s most prominent Nvidia bull, but the GPU giant hardly lacks support elsewhere. NVDA's Strong Buy consensus rating is based on 26 Buys, 4 Holds and 1 Sell. However, considering shares have already appreciated by 135% year-to-date, the analysts anticipate the stock to stay range-bound for the foreseeable future, as the $571.19 average price target indicates. (See NVDA stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.