No more “sell” valuations for Nvidia on Wall Street after its strong second-quarter earnings.
Morningstar was the latest company to abandon its bearish view. There are now 54 “Buy” ratings and five “Hold” ratings for Nvidia.
“We have no doubt that Nvidia will sell every GPU it can secure from TSMC in the coming quarters,” Morningstar said.
Morningstar research analyst Brian Colillo upgraded Nvidia to “hold” from Wall Street’s equivalent “sell” rating in a note on Wednesday. He increased Nvidia’s “fair value” estimate to $480 from $300.
nvidia Reported second quarter revenue at $13.5 billion, beating analyst estimates of $11.1 billion. Just a few months ago, analysts predicted revenue of about $7 billion. Adjusted earnings per share of $2.70 beat estimates of $2.09.
For the third quarter, Nvidia expects its revenue to be around $16 billion, far exceeding expectations of $12.4 billion.
“We’re now more optimistic about increasing AI workloads and how broad the moat Nvidia should cement itself as a leader in AI chips,” Colillo said.
“Based on the results and guidance and expansion of supply at key partners such as TSMCHe added, “We expect Nvidia’s data center business, which includes AI graphics processors, to generate $41 billion in revenue in fiscal year 2024. This compares to $15 billion a year ago and just $3 billion just four years ago.”
Colello’s upside could have staying power based on strong Nvidia results, according to the note. He called Nvidia’s capital allocation “exemplary” and described the company’s economic moat as “wide”.
One of the big concerns for Nvidia investors is that the current boom in business represents an increase in demand that will be short-lived. But Colilo does not agree.
“We may be wrong, but we see little evidence that these GPU requests are a one-time upfront or build-out spend… We expect further growth of $60 billion in data center revenue in fiscal 2025, rising to $100 billion.” American in fiscal 2028, Colillo said. This growth may be unprecedented in the big-cap technology space, but we expect all kinds of companies to invest in AI.”
“We have no doubt that Nvidia will sell every GPU it can secure from TSMC in the coming quarters.”
According to data compiled by Bloomberg, Wall Street has 54 “buy” ratings and five “hold” ratings on Nvidia stock.
One Analyst who flipped from “hold” to “buy” on Nvidia He is Robin Roy from Stifel. In a note on Wednesday, he noted that visibility on the company’s demand has been expanded, which should reduce uncertainty.
“Although we have long viewed NVDA as the primary beneficiary of the increasing investments being made on large language models/generated AI training blocks, we have underestimated the opportunity associated with the potential shift of $1 trillion of proven data center infrastructure from General-purpose computing is to speed up computing architectures, Roy said.
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