Piper Sandler analyst Harsh V. Kumar reiterated an Overweight rating on Nvidia Corp (NASDAQ:NVDA) with a $1,050 price target, his top large-cap pick.
During his recent AI Discovery Bus Tour, Kumar engaged directly with Nvidia’s management team, which allowed him to delve deeper into the company’s current operations and future prospects.
Despite being in the market for nearly two years, the demand for Nvidia’s Hopper GPU remains robust, with the supply needing to catch up, as per the analyst.
He said the supply-demand imbalance will likely continue throughout the year, potentially offering a slight margin boost until the introduction of the Blackwell GPU.
As per Kumar, the launch of the Blackwell GPU later this year will likely mirror the supply and demand challenges faced by Hopper.
Customers are reluctant to switch their orders from Hopper to Blackwell, fearing even longer wait times due to anticipated supply constraints.
Nvidia’s management addressed concerns about the power requirements for upcoming data centers, who assured that their accelerated computing solutions are significantly more power-efficient than traditional computing, Kumar said.
Plans are in place to optimize power needs for future data centers, including leveraging “trapped power” in specific regions and considering new data centers in countries that can meet these significant power demands.
Pricing discussions centered on the Total Cost of Ownership (TCO) benefits provided by Nvidia to its customers, indicating no change in pricing philosophy with the introduction of the Blackwell architecture, he said.
While the company aims to maintain competitive pricing, gross margins for the Blackwell architecture will likely be slightly below the corporate average as it ramps up.
Revenue opportunities from data center products sold to sovereign entities are currently being realized by Nvidia, with expectations for this demand to significantly contribute to the company’s revenue in the near term, as per Kumar.
The move towards liquid-cooled systems, especially with the GB200, is another area of innovation, with major Cloud Service Providers committing to adopting the GB200, primarily for inference applications.
In terms of valuation, Nvidia’s shares are trading at a premium compared to its peers, reflecting Nvidia’s continued leadership and innovation in the GPU market.
Kumar projected first-quarter revenue and EPS of $24.01 billion and $5.41.
After hosting an industry expert on the data center and AI supply chain, Mizuho analyst Vijay Rakesh noted Nvidia’s leading AI GPU with a strong software moat. He also said Nvidia is leading AI accelerators, especially for training.
Nvidia continues to be the AI leader, with continued tightness on H100 and H200. Blackwell B100 is set to launch in 2024 and ramp up in 2025, as per the analyst.
However, he also flagged some potential challenges with new high-power Nvidia systems with power-to-rack and cooling solutions, a major data center challenge.