Shares of Nvidia (NVDA) - Get Report rose Thursday after the semiconductor firm was the subject of two bullish notes from analysts at Needham and Citigroup ahead of the popular CES electronics trade show next week.
Nvidia shares were rising 4.3% to $526.14 Thursday morning. Here is what Wall Street is saying.
Needham (Maintain Buy rating, $700 PT)
We believe near-term demand trends in the core data center and gaming segments remain robust. Core data center (ex-[Mellanox]) are tracking well in F4Q (Jan) as the major hyperscalers ramped up their CapEx spending on accelerators in the data center, bucking overall CapEx trends.
Gaming demand is robust in F4Q and is on track to grow in a normally seasonally down quarter. Ray tracing is rapidly becoming becoming mainstream - all the top games and next generation consoles are Ray tracing enabled. On the cautious side, demand is still outstripping supply for both gaming and data center segments, while it's more pronounced on the gaming side.
Lastly, while there's renewed concerns around a pending decline in crypto pricing given the meteoric rise over the past year, and the subsequent impact to NVDA's GPU cards, we argue today is a different dynamic than in 2018. Today, there's a larger installed base of mining capacity, which could prevent an overbuild of GPU cards and NVDA is undergoing an architectural GPU upgrade cycle that is fueling demand.
Citigroup (Added to "Catalyst Watch List," $600 PT)
We expect hyperscale-led data center demand recovery in 1H21 and sustained PC gaming demand despite tight supply to drive upside to near-term Street estimates. Our Jan/Apr-Q EPS estimates are 2% / 5% above Street. Citi will be hosting NVIDIA’s Chief Financial Officer Colette Kress for an investor meeting on Tuesday Jan 12th.
Investors want to understand to what extent is Jan-Q data center hampered by cloud digestion vs shortages and expectations for overall data center demand pick-up this year. NVIDIA did not see hyperscale digestion similar to semi peers in the Oct-Q and expects hyperscale business to grow sequentially in the Jan- Q. Data center overall is guided down due to a meaningful decline in Mellanox driven by not shipping to Huawei in Q4 – excluding that the data center business is growing.