Nvidia's Future Has More Than Meets the Eye in AI Growth: Morgan Stanley – NVIDIA (NASDAQ:NVDA)

Morgan Stanley Analyst Joseph Moore reiterated the Overweight rating Nvidia company (NASDAQ:NVDA) and raised its price target to $750 from $603.

The analyst stated that Nvidia shares saw significant growth as of late 2023, indicating strong near-term results.

Despite initial concerns about excessive earnings and demand cuts from important customers, Nvidia's valuation, which enters the year at less than 25 times next-twelve-month (NTM) earnings per share (EPS), has seen few similarities in years The latter, as Moore pointed out.

Read also: Nvidia vs. Huawei: The battle for AI supremacy heats up as chip limitations redirect focus

Concerns and performance of secondary AI entities e.g Advanced Micro Devices Company (NASDAQ:AMD) and Super Micro Computer Company (NASDAQ:SMCI) fueled a strong January for Nvidia.

However, according to the analyst, such a setup is unlikely to be repeated soon due to potential sustainability concerns following the earnings announcement.

In the short term, despite some negative interpretations, many indicators point to exceptional results for Nvidia in the coming quarters, Moore said.

Demand for cloud GPU instances remains high, with developers facing long waitlists for model training.

This demand extends beyond cloud services to include significant investments from governments, enterprise software developers and consumer Internet companies, Moore said.

The analyst added that supply chain indicators also expect a significant beat of consensus estimates despite some variation in Nvidia's card and system components.

Customer delays are more attributable to infrastructure bottlenecks rather than decreased demand, indicating continued strong demand but challenges in the rapid expansion of the ecosystem.

Quality issues with one customer's power management chip are likely to be short-term, with demand shifts expected from the H100 to the more advanced B100 production line, according to Moore.

On a competitive level, although alternatives are being explored by cloud providers due to Nvidia chipset shortages, Nvidia's position in training is still dominant.

He noted that the inference market may see more competition, but Nvidia will likely continue to grow significantly in CY24 and CY25.

The company is raising its estimates for CY24, reflecting confidence in continued strong performance and addressing any potential market consolidation or shifting customer preferences toward Nvidia's offerings, Moore said.

Moore expects FY24 revenue and earnings per share to reach $59.85 billion (versus $54.99 billion) and $11.59 (versus $11.46).

Price movement: NVDA shares were trading 1.78% higher at $694.40 at last check on Wednesday.

Read also: TSMC and Samsung team up on home soil to produce advanced chipsets amid global expansion

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