Nvidia (NVDA), the leading maker of graphics processing units (GPUs) for gaming and artificial intelligence, saw its stock price soar on Monday, leading the S&P 500 and the tech sector higher. The company benefited from a bullish note from Morgan Stanley, which raised its price target and earnings estimates for Nvidia, citing strong demand for its chips and its competitive edge in the AI market.
Morgan Stanley Raises Nvidia’s Price Target to $500
Morgan Stanley analyst Joseph Moore upgraded his rating on Nvidia from equal weight to overweight and increased his price target from $380 to $500, implying a 16% upside potential from Friday’s close. Moore also raised his earnings per share estimates for fiscal 2023 and 2024 by 9% and 11%, respectively.
Moore said that Nvidia is well positioned to capitalize on the massive shift in spending towards AI, as its GPUs are the preferred hardware for deep learning applications. He also noted that Nvidia has a fairly exceptional supply-demand imbalance that should persist for the next several quarters, as the company faces strong demand from both gamers and data center customers.
“NVIDIA remains our top pick, with a backdrop of the massive shift in spending towards AI, and a fairly exceptional supply-demand imbalance that should persist for the next several quarters,” Moore wrote in a note to clients on Monday.
Nvidia Shares Jump 7.1%, Outperforming Peers and Indexes
Nvidia’s stock rose 7.1% to close at $432.55 on Monday, its biggest single-day gain since May 25, when it surged 24% on a stellar revenue forecast. The company added $35 billion to its market value, reaching $267 billion.
Nvidia outperformed its peers in the semiconductor industry, as well as the broader market indexes. The PHLX Semiconductor Index (SOX), which tracks the performance of 30 chip stocks, gained 2.6% on Monday. The S&P 500 index rose 0.6% to end at a record high of 4,489.72 points. The Nasdaq Composite index climbed 1.1% to 13,788.33 points.
Other chipmakers also posted solid gains on Monday, as the sector benefited from strong demand and tight supply conditions. Micron Technology (MU) rose 6.1%, Advanced Micro Devices (AMD) gained 3.8%, and Intel (INTC) added 1.5%.
Nvidia Prepares to Report Q2 Earnings Next Week
Nvidia is scheduled to report its second-quarter earnings for fiscal 2023 on Wednesday, August 23, after the market close. Analysts expect the company to post revenue of $6.33 billion, up 63% year-over-year, and earnings per share of $1.02, up 68% year-over-year.
The company has a history of beating analysts’ expectations, as it has delivered positive earnings surprises in each of the past four quarters. In the first quarter, Nvidia reported revenue of $5.66 billion, up 84% year-over-year, and earnings per share of $0.88, up 106% year-over-year.
Investors will be looking for updates on Nvidia’s growth drivers, such as gaming, data center, automotive, and professional visualization segments. They will also be interested in the company’s progress on its planned acquisition of Arm Holdings, the British chip designer that powers most smartphones and tablets.