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Nvidia: Primed to Win in the AI Space but Valuation Is Running Hot, Says Analyst
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Nvidia: Primed to Win in the AI Space but Valuation Is Running Hot, Says Analyst

Nvidia’s (NVDA) latest Investor Day amounted to a celebration of artificial intelligence (AI). And according to CEO Jensen Huang, every industry will be transformed by the tech, which by the looks of it, is good news for the chip giant.

The company announced several new hardware products, ranging from CPUs (Grace Superchip), Networking (Spectrum-4 ethernet platform) and Systems (DGX H100). But the most eye-catching of all was the unveiling of the next-gen H100 Data Center GPU which is based on NVDA’s Hopper architecture.  

For AI use cases, Nvidia’s GPUs are already the dominant force in the market and the latest release should further cement its leading position. According to the company, the H100 can help cut the time it takes to train AI models from weeks to days in some cases.

The company’s new “Eos” supercomputer will also be constructed utilizing the H100. When it starts operating later in 2022, Nvidia claims it will be the world’s fastest AI system.

Perhaps even more enlightening, says Deutsche Bank’s Ross Seymore, were the software announcements. These included new and upgraded AI software tools for speech recognition and translation, smart recommendations and AI enhanced audio and video, amongst others. The company also detailed its growth drivers (Nvidia AI, Omniverse), and said the long-term TAM for the software segment stands at ~$300 billion.

That forms part of what Nvidia believes is a total SAM (service addressable market) of $1 trillion. While Seymore says $1 trillion may “prove optimistic,” the 5-star analyst thinks NVDA is uniquely “suited to benefit from the growth of AI in hardware and potentially software.”

“However,” Seymore went on to say, “from an investor perspective, we believe much of this future growth potential is already captured in NVDA’s premium multiple.”

As such, given the “valuation premium,” the fact no F1Q guidance updates were provided and the shares’ recent strong run, Seymore sticks with a Hold rating and $285 price target. (To watch Seymore’s track record, click here)

However, most of Seymore’s colleagues disagree. 4 other analysts join Seymore on the sidelines but with 18 additional Buys, the stock boasts a Strong Buy consensus rating. Going by the $349.05 average target, shares are anticipated to rise by 36% over the coming months. (See Nvidia stock forecast 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.

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.

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