Nvidia Corp. NVDA has been on an impressive rally, surging over 200% year-on-year. John Vinh, one of keyBanc Capital Markets' analysts, thinks there's still room for more growth in the future.
Vinh, maintaining an Overweight rating on Nvidia shares, has raised the price target from $670 to $750, indicating a potential upside of around 67.5% from current trading levels.
Vinh, following KeyBanc's quarterly supply chain checks, said that although China's demand remained weak, it didn't deteriorate significantly.
Vinh said that some recovery had been observed in the PC and smartphone markets. Inventory destocking in the channel showed progress. The AI data center's demand remained exceptionally strong, outpacing supply by approximately 20% due to limited chip-on-wafer-on-substrate capacity.
Despite concerns about Huawei reintroducing the market, the Android smartphone supply chain experienced rush sales, with Nvidia, Synaptics Inc. SYNA, Intel Corp. INTC, and Qorvo, Inc. QRVO benefiting the most from these trends, which include Nvidia, Synaptics Inc., SYNA, Intel, and Qorvo, Inc. QRVO.
Vinh sees the opportunity for Nvidia in the second half, driven by a strong demand for L40S, a GPU designed for data center workloads like generative AI and large language model inference and training. The GPU is expected to generate a revenue of $2.25 billion to $3 billion with a revenue contribution of $2.25 billion.
In the second half, Nvidia is predicted to benefit from a favorable mix shift from A100 to a higher ASP H100. The company also secured more CoWoS capacity from Amkor Technology, Inc. AMKR at Taiwan Semiconductor Manufacturing Company Ltd. TSM.
Vinh predicts that Microsoft Corp. MSFT/Open AI will procurement 450,000 Nvidia GPUs this year, bringing in $11 billion in revenue and 1.6 million GPUs next year, contributing $40 billion in revenue.
Apple is expected to buy 200,000 H100 GPUs next year, or $5 billion in revenue, Vinh said.
Vinh said he regrets what he said to be the worst mistakes of the protests.
In fiscal Year 2024, KeyBanc expects Nvidia's revenue to increase 201%, and 101 billion for fiscal Year 2025, up 124%.
Nvidia's share closed Monday at $447.82, up 2.95%, according to Benzinga Pro data.
Nvidia shares are in position to climb as chipmaker remains main in the AI gold rush, Goldman Sachs says.