In just one week — on Tuesday, November 21, 2023 — semiconductor giant Nvidia (NASDAQ:NVDA) is scheduled to report earnings for its fiscal Q3 2024. And investors are getting excited.
On Tuesday this week, Nvidia stock notched its tenth straight day of rising stock prices. With five more days to go until earnings arrive, Morgan Stanley analyst Joseph Moore poured fuel on investors’ fiery desire to own Nvidia stock. Even with 10 straight days of gains under its belt, says Moore, Nvidia stock “is likely to continue to trade up into” earnings day.
And then when earnings finally do come out, it could trade up some more.
Why does Moore think this? It’s more (pardon the pun) than just an “objects in motion tend to stay in motion” argument. Moore sees two key dynamics supporting Nvidia’s run higher. The first is that “supply demand” dynamics remain intact. Meaning, there’s “tight availability” of Nvidia’s H100, A100, and Mellanox chips, with the purchase of H100 chips for example requiring that orders be placed 30 weeks and more before they ship. And Moore observes that even “large hyperscalers” — large data center facilities that are used for training artificial intelligence systems for example — which are generally saying they can get all the chips they need, aren’t able to get much more than they need.
In short, there’s lots of demand but no oversupply in this market — at least not for Nvidia’s chips.
At the same time, Moore notes that Nvidia is making great strides ramping production to meet the demand for its chips as it continues to grow. “The data center supply chain continues to ramp very rapidly,” observes the analyst, such that Nvidia can supply all the chips the market can accept. Even as Nvidia’s own data center business has grown three times in size over the course of barely half a year, supplies of advanced packaging, advanced memory, and accompanying components needed to produce the company’s chips “are all still growing 50%+ per quarter.”
Moreover, Moore notes that worries over US government restrictions on advanced chip exports to China do not appear to be a huge concern in the near term. Nvidia itself calls the risk “immaterial near term,” despite China accounting for anywhere from 20% to 25% of its long term market for data center chips. Moore notes that among other reasons for this, (1) Nvidia may not yet have begun producing large numbers of A800 and H800 chips for the Chinese market, viewing it more as a long-term opportunity; (2) at the same time, Nvidia may be planning to produce new chips, low enough in power so as to not get caught by the restrictions on exports to China; and (3) the global demand for its chips may be so large that any chips Nvidia cannot sell to China, it can simply sell somewhere else.
In any case, the end result of all the above is that Moore sees essentially zero chance of a sales miss next Tuesday, and indeed, expects Nvidia to exceed (everyone else’s) expectations. He’s furthermore raising his Q4 sales estimate by about 8% (to $19.4 billion in sales), even as he moderates predictions for both fiscal 2025 sales ($89.7 billion) and fiscal 2026 sales ($91.6 billion).
He calculates that if Nvidia performs as expected, the stock will be worth $600 per share — and rates the shares Overweight (i.e. Buy). (To watch Moore’s track record, click here)
The analyst consensus on NVDA is not unanimous, but almost. The Strong Buy consensus rating is supported by 37 Buys against a single Hold – Wall Street is sanguine about this stock. Shares sell for $494, and the average price target of $647.32 indicates an upside of 31%. (See NVDA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
