Anyone looking for a “ball out of the park” success story from 2020 needn’t look much further than Nvidia (NVDA). Shares are up by 50% since the turn of the year, with the GPU giant charging ahead, constantly boosted by new catalysts. The latest, according to Credit Suisse analyst John Pitzer, is the release of the company’s new GPU, the DGX A100, which will further expand Nvidia’s TAM (total addressable market).
The 7nm DGX A100 is the first based on Nvidia’s next-generation Ampere architecture. Compared to its predecessors, the DGX-1/DGX-2, the new GPU’s data crunching abilities take it to another level, computationally able to do challenging AI/deep learning tasks, take on traditional high-performance computing (HPC) modeling and simulation workloads, as well as enables “solutions across the full processing/ networking/storage stack.” Pitzer argues these will increase DCG’s (data center group) TAM from $50 billion to $60 billion.
Pitzer points out that the A100 delivers “1/10th the cost, 1/20th the power, and in 1/25th the space” compared to CPU-based data centers processing a similar amount of data. The GPU DGX A100, “the most powerful AI processor to-date,” is already gaining traction with other mega-caps such as Microsoft, Alibaba, Google and Amazon.
The gap between Nvidia’s data center sales and its traditionally more profitable gaming segment has been narrowing, with the former increasingly getting a bigger chunk out of Nvidia’s total revenue over the last few quarters. Pitzer believes the new GPU will act as the tipping point, expecting “an important F2Q milestone – DCG (47% of Revenue) will be larger than Gaming (38% of Revenue) for the first time ever.”
The 5-star analyst further said, “We expect an elasticity of application explosion to underpin our view that the $90bn Compute TAM CAGR will accelerate from 3-5% to 10-15% with NVDA’s DCG CAGR of at least 2x TAM – Global COGS of $43 trillion, 1% value capture for Semis, 20% of that for Compute… We continue to see NVDA as the best secular growth stock in Semis with an almost open-ended TAM protected by first movers advantage and wide/deep moats in both silicon AND software.”
No surprise to learn Pitzer has an Outperform rating on Nvidia to go along with a $425 price target. The implication for investors? Upside potential of 22%. (To watch Pitzer’s track record, click here)
There aren’t many on the Street betting against Nvidia right now. 3 Holds and 1 Sell vs 27 Buys result in a Strong Buy consensus rating. The average price target of $381.02 implies upside potential of 9%. (See Nvidia stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.