Nvidia stock can still climb another 26% as supercomputer launch solidifies its lead in the AI arms race, Bank of America says


Nvidia CEO Jensen Huang speaks during a press conference at The MGM during CES 2018 in Las Vegas on January 7, 2018.

Nvidia stock still has 26% upside after its eye-popping year-to-date rally of 170%, according to Bank of America.The bank said Nvidia’s recent launch of the DGX GH200 AI supercomputer solidifies its lead in the AI arms race.“Nvidia [is] uniquely positioned with a full-stack of AI silicon, software, scale, supply and developer ecosystem,” Bank of America said.

Even after Nvidia’s dizzying year-to-date rally of 167%, the stock still has an additional 26% upside from current levels, according to a Tuesday note from Bank of America.

The bank reiterated its “Buy” rating on the stock and raised its price target to $500 from $450 after the company launched a slew of new products over the holiday weekend, including an AI supercomputer that solidifies its lead in the artificial intelligence arms race.

“Key product announcements at Computex only further bolster Nvidia’s AI position, benefitting from early-mover advantage and strong execution,” BofA said.

The bank highlighted that the company has entered full volume production of its H100 and HGX H100 servers, which currently sell on eBay for upwards of $45,000. The chips help enable generative large language models like OpenAI’s ChatGPT and Alphabet’s Bard. 

Nvidia also unveiled the new DGX GH200 AI supercomputer, which combines up to 256 GH200 Superchips. Microsoft, Meta Platforms, and Alphabet will be the first mega-cap tech companies to gain access to the chips, according to the note. 

The key to Nvidia’s success is its full-stack platform that combines both the hardware and software necessary for generative artificial intelligence, according to the bank.

That full-stack approach has transformed Nvidia into a “data center powerhouse” as companies incorporate the company’s GPU hyperscaler chips into their infrastructure, BofA said. The strength is evidenced by Nvidia’s partnership with more than 1,600 generative AI startup companies, and that’s just the beginning, according to the note.

“AI upside is driving strong performance year-to-date, but we believe we are only at the start of the story. Only ~15% of cloud servers are accelerated today, becoming more essential as GPUs are required for proper training of LLMs,” BofA said.

Nvidia is also making inroads in the networking space thanks to its 2020 acquisition of Mellanox, and building out its network pipeline could ultimately help Nvidia better monetize the fast-growth opportunity in AI. Additionally, Nvidia’s gaming business is set to see seasonal strength in the second half of the year.

“In-turn, we continue to see long-term EPS power of $20, which could be conservative with growing data center portfolio driving margin expansion,” BofA said. Nvidia earned less than $2 per share over the past year, so a jump to $20 in annual earnings per share speaks to the real growth potential for Nvidia.

“Nvidia [is] uniquely positioned with a full-stack of AI silicon, software, scale, supply and developer ecosystem to transform the nearly $1 trillion traditional data centers market,” BofA said. 

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