NVIDIA, the leading graphics processing unit (GPU) manufacturer, has been maintained at a Buy rating by Bank of America (BofA) with a price target of $550. In a report released on Monday, BofA analysts identified NVIDIA as their top sector pick ahead of the company’s second-quarter earnings announcement.
The analysts expressed a favorable view of the stock, citing NVIDIA’s dominant position and its potential to transform the traditional global data center industry into AI/accelerated compute. They noted that the company has a multi-year runway to capitalize on this opportunity, as the market is estimated to be worth more than $1 trillion.
While demand for NVIDIA’s products remains strong, the analysts highlighted potential challenges related to supply constraints, particularly in packaging and memory. In addition, they emphasized the importance of monitoring the pace at which US cloud service providers (CSP) can establish genAI compute instances.
Looking ahead, the analysts provided their sales projections for the second and third quarters of NVIDIA’s fiscal year. They expect second-quarter sales to be in line with or slightly exceeding the guidance of $11 billion, representing a significant 64% year-over-year growth. Out of these sales, around $7.8-8 billion is expected to come from data center revenues.
For the third quarter, the analysts project even stronger sales growth, reaching up to 100% year-over-year and totaling $12-$12.5 billion. In a more bullish scenario, sales could reach $13-14 billion, driven by data center revenues of $8.5-9 billion or even $10-$11 billion.
The analysts concluded by stating that investors will be closely monitoring NVIDIA’s ability to sustain its optimistic forecasts, considering the lukewarm capital expenditure environment of US CSPs.
This latest report from BofA reaffirms the confidence in NVIDIA’s future prospects and its position as a key player in the AI and data center markets. As the company prepares to announce its second-quarter earnings, market watchers will be awaiting clues regarding the sustainability of NVIDIA’s robust growth trajectory, taking into account the current industry dynamics and potential challenges in the supply chain.
Regarded as a sector leader, NVIDIA’s continued proficiency in innovation and delivering high-performance GPUs has solidified its presence in various industries, including gaming, data centers, and autonomous vehicles. With its strong financial performance and long-term vision, NVIDIA remains an attractive investment option for those looking to capitalize on the ongoing digital transformation trend.
