Nvidia shares close 4% as analysts say data center growth ‘has some room to function’

Nvidia Corp. shares closed higher after a rally Thursday, as more than half of analysts covering the chipmaker raised their price targets after the company’s record quarter and forecast newer highs based on In data center profits.

+ 3.98%

The shares ended up 4% higher at $ 197.98, following an intraday high of $ 204.95, while the PHLX Semiconductor Index
+ 0.84%

closed 0.8% higher, and the S&P 500 index
+ 0.13%

gained 0.1%. Nvidia shares last closed at adjusted divided record $ 206.99 on July 6, and they are up 63% in the last 12 months.

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Nvidia forecast revenue of $ 6.66 billion to $ 6.94 billion on Wednesday, above Wall Street estimates at the time, and said that the “lion’s share” of the $ 500 million increase will come from data center sales. That follows new data center, gaming and total revenue records that Nvidia reported for the quarter.

What many analysts found is that the demand for graphics processing units (GPUs) for cryptocurrency mining did not influence the outlook as much. That was a relief to analysts, who noted lower crypto risk compared to 2018, when a drop in cryptocurrency values ​​led many miners to sell their card gaming rigs, flooding the market with second-hand cards. .

Full coverage of earnings: Nvidia Reports Record Gaming and Data Center Revenue, But Supply Limitations Remain a Concern

Nvidia broke the sales of its Cryptocurrency mining processors, or CMP, which aim to divert mining demand from GPUs made for gamers and which are not expected to be significant in revenue gains.

However, data center sales garnered much more attention from analysts. Bernstein analyst Stacy Rasgon, who has an outperformance rating on the stock and raised her price target to $ 230 from $ 180, said that while “the company has absolutely no problem continuing to smash the games,” the Nvidia’s data center story “still feels like it has some room to run.”

“The history of the data center is really coming to life now, with a considerable inflection in the near term and with the potential for the segment to match, and potentially surpass, gaming in the not-too-distant future,” Rasgon said.

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Evercore ISI analyst CJ Muse, who has an outperformance rating and a $ 250 price target, called data center sales a “key to the stock.”

“Data Center Revenue Driven to Accelerate in Q3 from Very Strong Competition Based on Strong Vertical and Hyperscale Customers, Training and Inference Applications, and Network and Computing Technologies – Democratization AI workloads remain a central theme here, and we see Nvidia leading the way and benefiting for the foreseeable future, ”said Muse.

Cowen analyst Matthew Ramsay, who has an outperformance rating and raised his price target to $ 220.00 from $ 176.25, said the data center acceleration was “the most important conclusion” of the call from Profits.

“We expect sustainable data center and gaming product cycles that should drive> 50% + organic growth for the company in F’2022,” said Ramsay.

Jefferies analyst Mark Lipacis, who has a buy rating and raised his price target to $ 223 from $ 214, addressed the lower risk of another crypto mining debacle.

Read: Cryptocurrencies are reshaping the world economy, 50 years after Nixon ended the peg of the dollar to gold. This is how some are playing it

“We believe that crypto-miners are one-tenth of gaming GPU sales compared to 2018,” Lipacis said. “We continue to believe that the risk of a crypto-driven gaming crash is low, and we expect the Nvidia ecosystem and rising software revenue to deliver additional upside surprises.”

Of the 41 analysts covering Nvidia, 34 have buy ratings, five have retention ratings, and two have sell ratings. Of those, at least 24 analysts raised their price targets in response to earnings and one lowered their target, according to FactSet. That resulted in an average price target of $ 219.23, up from $ 204.24 previously.

Nvidia, which has become the largest US chipmaker by market capitalization of around $ 500 billion, larger than Intel Corp.
+ 0.48%
Advanced Micro Devices Inc.
+ 0.25%
and Micron Technology Inc.



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