Even though Wall Street expected a beat-and-raise quarter from Nvidia Corp., many were blown away by the sheer magnitude of the upside as demand for AI-chip systems skyrocketed and as management highlighted continued momentum.
Morgan Stanley analyst Joseph Moore praised Nvidia
Thursday for “remarkable supply chain performance” in its ramp up of artificial-intelligence systems, reiterating an overweight rating on the stock and hiking his price target to $630 from $500.
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“But what is even more impressive is the fact that from most of our channel assessments…Nvidia is only meeting about half of the demand, despite growing revenues by more than 3x in 6 months,” Moore said. “Part of that is improvement in price — with H100 prices about 2.5x A100 — and monetization — with a higher portion of business in server form vs. cards given tight supply.”
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The biggest surprise, however, has been how prevalent demand has been and how quickly it developed, Moore said.
“We would reiterate that the driver of the upside vs. our initial forecasts (which were intended to be enthusiastic, but which were much too low) has been the
breadth of customer activity,” Moore remarked. “Certainly, nearly all customers are spending more on AI than they contemplated just six months ago, but the breadth of large language model training has been the biggest surprise.”
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“We expected growth in spending from large global hyperscalers, but the level of spending from smaller cloud and consumer customers has been surprising,” Moore said.
His note comes after Nvidia Corp.
reported earnings late Wednesday, showing that demand for AI-systems drove data-center sales that were more than $2 billion above the Wall Street consensus. The company also forecast revenue for the third-quarter that was more than $3 billion above expectations.