Piper Sandler analyst Harsh V. Kumar recently reaffirmed an Overweight rating on Nvidia Corp (NASDAQ:NVDA), setting a price target of $1,050 and identifying it as his top large-cap pick. Kumar’s insights were gleaned from direct engagement with Nvidia’s management team during the AI Discovery Bus Tour, providing him with an in-depth understanding of the company’s current strategies and future prospects.
Despite Nvidia’s Hopper GPU being on the market for nearly two years, the demand for this product remains robust, surpassing the current supply capacity. Kumar notes that this supply-demand imbalance is expected to persist throughout the year, potentially resulting in a slight margin boost until the introduction of the Blackwell GPU. However, he anticipates that similar supply and demand challenges may emerge with the launch of the Blackwell GPU, as customers are hesitant to transition their orders from Hopper due to anticipated supply constraints.
Addressing concerns about power requirements for upcoming data centers, Nvidia’s management reassured investors that their accelerated computing solutions are significantly more power-efficient than traditional methods. Plans are underway to optimize power needs for future data centers by exploring options such as leveraging “trapped power” in specific regions and considering new data center locations in countries with ample power resources.
Discussions on pricing focused on the Total Cost of Ownership (TCO) benefits Nvidia provides to its customers, with no expected changes in pricing philosophy with the introduction of the Blackwell architecture. However, Kumar predicts that gross margins for the Blackwell architecture may be slightly below the corporate average during the initial ramp-up phase.
Highlighting revenue opportunities from data center products sold to sovereign entities, Kumar expects this demand to be a significant revenue contributor in the near term. Additionally, the transition towards liquid-cooled systems, particularly with the GB200, represents another area of innovation for Nvidia. Major Cloud Service Providers have committed to adopting the GB200, primarily for inference applications.
In terms of valuation, Nvidia’s shares trade at a premium compared to its peers, reflecting the company’s continued leadership and innovation in the GPU market. Kumar projects first-quarter revenue and EPS of $24.01 billion and $5.41, respectively.
Mizuho analyst Vijay Rakesh also recognizes Nvidia’s leading position in AI GPU with a strong software moat and its prominence in AI accelerators, especially for training. However, Rakesh highlights potential challenges with new high-power Nvidia systems concerning power-to-rack and cooling solutions, a significant data center challenge.
NVDA shares traded lower by 2.22% at $862.22 on the last check Monday.
It’s important to note that this content was partially produced with the assistance of AI tools and was reviewed and published by Benzinga editors.