Nvidia (NASDAQ:NVDA) has played a pivotal role in driving the current bull market, establishing itself as the undisputed AI leader. Its astounding growth has catapulted it to become the world’s third most valuable company.
It’s hardly shocking, then, that following discussions with several members of Nvidia’s management team, Bank of America’s Vivek Arya concluded that the sentiment from the investor meetings was very positive. Arya, an analyst ranked in the 11th spot among thousands of Wall Street stock pros, observed strong demand and increasing customer interest, tempered only by supply constraints.
On the issue of supply, while constraints can sometimes result in double ordering, Nvidia indicated that their customers are engaging in very careful planning due to several factors: 1) the significant capital expenditure needed for deploying generative AI rather than smaller-scale traditional chip (CPU) projects, 2) the considerable prep work (such as land and power requirements) necessary to establish compute instances (with cluster sizes of 100,000 GPUs this year compared to the previous record of 20-30,000), and 3) the company’s “multiple touch points” in computing, networking, and software, supported by firm purchase orders.
Additionally, Nvidia anticipates a significant attach rate for its ARM-based Grace server CPU paired with the Blackwell GPU in the GB200 NVL 36/72 configuration next year, driven by new AI workloads without dependence on x86 architecture.
Moreover, the chip giant noted strong demand for its Ethernet Spectrum-X switch, projecting multi-billion-dollar sales in 2024 for the switch and related network interface cards, thanks to its advanced adaptive routing and congestion control features.
“If NVDA is right,” says Arya, “Grace attach-rate a headwind to x86 CPU rivals (INTC, AMD) while Ethernet share headwind to AVGO, though a rising tide (networking ~15% of AI spend) benefits both NVDA/AVGO.”
Looking at the bigger picture, it’s one that paints a long-term opportunity with plenty of room left to run. “Despite claims by rivals (AMD, Intel, custom chips or ASICs) we see NVDA with a multi-year lead in performance, pipeline (Blackwell, successors), incumbency, scale and developer support (5mn+),” said the 5-star analyst. “NVDA stock appreciation could enhance volatility, but at just 31x CY25E PE, it’s trading below its median 33x PE; below Nov-22 levels when ChatGPT was launched; and below <1x PEG ratio (given 99%/39% exp. EPS growth in CY24/25E) vs. S&P 500 index at ~2x PEG.”
Given Nvidia is “best positioned to enabling the $3 Trillion IT industry towards delivering AI services,” Arya keeps the stock as his “top sector pick,” while reiterating a Buy rating and Street-high $1,500 price objective. This suggests further gains of 24% are in store for the coming year. (To watch Arya’s track record, click here)
Amongst Arya’s colleagues, barring 3 Holds, all 37 other recent analyst reviews on NVDA are positive, making the consensus view here a Strong Buy. (See Nvidia stock forecast)
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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.
