Nvidia Corp. could come to dominate the data center in the way Apple Inc. did. smartphones did, according to one analyst amid several glowing reports from Wall Street after the chip company reported a spectacular quarter and outlook.
Nvidia NVDA,
shares traded up plus-minus 2% on Thursday, closing 10 cents, or less than 0.1%, at $ 485.64, after a run where the stock gained nearly 14% in four straight sessions to close at a record $ 493.48, giving the company a $ 300 billion market cap for the first time. Shares are up 106% for the year, compared to an 18% gain in the PHLX Semiconductor Index SOX,
and a gain of 4.8% in the S&P 500 index SPX,
Late Wednesday, Nvidia topped Wall Street’s estimates for both its fiscal 2021 second quarter and its forecast, with data center sales surpassing its core gaming business for the first time.
Jefferies analyst Mark Lipacis, who has a buying character and price target of $ 570, compared Nvidia to Apple’s AAPL,
in the smartphone era as well as to the software / hardware duo of Microsoft Corp. MSFT,
and Intel Corp. INTC,
in the PC era when it comes to dominating an ecosystem.
In the case of Nvidia, the ecosystem in question is that of parallel processing, which gets the heart of AI and machine learning. Not only does Nvidia make the graphics processing units that are in data centers in great demand, but those GPUs run on Nvidia’s proprietary CUDA programming platform.
Lipacis said Nvidia “is best positioned to become the de facto standard of the Parallel Processing Era and capture 80% of the value of this ecosystem.”
“We think the company will continue to be surprised, and it would not be surprising if NVDA undertakes more M&A to build its capabilities for data systems,” Lipacis said.
Nvidia just closed its $ 6.9 billion acquisition of Mellanox Technologies Ltd. this past April, and the first full quarter of having the network products on board went a long way.
At Wednesday’s conference call, Chief Financial Officer Collette Kress said Mellanox contributed about 14% of total revenue in the quarter and more than 30% of data center revenue, and “was a critical part of several of our key introductions. for new products this quarter. ”
Cowen analyst Matthew Ramsay, who has an outperforming rating and reached his goal of $ 540, questioned whether the “really really really good quarter” for Nvidia was “good enough”.
“We believe Nvidia had to print a perfect quarter to drive shares higher, and this may be the only bone that is plucked,” Ramsay said. “Looking ahead, we expect a sustainable data center product cycle that should go through the rest of F2021 and F2022, further enhanced by Mellanox now fully integrated.”
To read:Nvidia hits a sweet spot, with both gaming and data center on the rise
However, gaming can not sit in the back seat for long. Ahead of Sept. 1, expecting to release a new line of gaming chips, Nvidia Chief Executive Jensen Huang said in a call on Wednesday that he thinks “this could very well be one of the best gaming seasons ever.”
Evercore analyst CJ Muse, who has outperforming ratings and reaches his price target of $ 600, said he expects both gaming and data centers to be maintained “through excellent growth” by 2021.
“With stocks up 100% + YTD, some may argue to take profits,” Muse said. ‘But in the words of Winston Churchill – this is not the end. It is not even the beginning of the end. But it is often the end of the beginning. ”
Of the 40 analysts who cover Nvidia, 32 have buy-in or overweight ratings, six have ratings for review and two have ratings as underweight. With 26 analysts walking away from price targets, Wall Street has an average target of $ 491.39 on the stock market, compared to a target of $ 430.71 for the earnings report, according to FactSet data.
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