NVIDIA's Path to Growth: Overcoming Mid-Term Hurdles and Eyeing AI Expansion

Morgan Stanley's recent report on May 19th expresses a cautiously optimistic outlook for
, despite CEO Jensen Huang's Computex presentation lacking major surprises. The investment bank highlights that while immediate growth catalysts were not evident, NVIDIA is poised for strong growth in the latter half of the year with clear pathways emerging out of previously existing concerns.The report identifies NVIDIA's comeback trajectory attributed to resolution in several mid-term challenges like client consumption cycles, the GB200 bottleneck, and ecosystem collaboration issues. These factors are said to have stabilized, paving the way for possible robust growth by the second half of 2025.
During the Computex event, NVIDIA showcased noteworthy product and technology developments, particularly NVLink Fusion. This innovation broadens ecosystem compatibility and can accommodate various hardware configurations, including custom ASICs and non-NVIDIA CPUs. According to
, this could enhance revenue from AI communication infrastructure, although its competitive impact requires further evaluation.NVIDIA also introduced the RTX PRO server targeting the corporate AI inference market, with capacities to integrate up to eight Blackwell RTX Pro Graphics 6000 cards, ensuring compatibility with the AI Enterprise Software Platform. Upcoming releases include the personal DGX Spark workstation slated for launch in July, followed by the DGX Station later this year.
Despite presenting several exciting technical advances, Morgan Stanley lists short-term obstacles NVIDIA faces, including the risk of U.S. Commerce Department scrutiny potentially targeting sales destinations, which may lead to over $50 billion in losses. Additionally, the sluggish shipment of GB200 chips could exert pressure on stock performance.
Nonetheless, mid-term concerns are gradually being addressed, offering optimism. Collaboration between cloud and LLM vendors is improving, and the previously identified GB200 bottleneck is easing. Furthermore, NVIDIA has announced partnerships for constructing a new supercomputer equipped with 10,000 Blackwell GPUs, bolstering its collaborative ventures, most notably with Taiwan.
Based on projected earnings of $5.70 per share for fiscal 2025, Morgan Stanley retains an "overweight" rating on NVIDIA, setting a price target of $160 per share, which reflects a PE ratio comparable to its AI sector peers but surpasses the broader semiconductor industry baseline. As of the last market close, NVIDIA's share price had escalated beyond 40% from its yearly low, reaching $135.57 per share.

Comments
No comments yet