Nvidia Might Have Some Bad News on Gaming. Buy the Stock Anyway?


  • Order Reprints
  • Print Article

Text size

Nvidia chips have high exposure to generative AI.


Nvidia is getting a vote of confidence for its long-term commitment to new artificial intelligence applications, despite poor sales for its new gaming card.

Analyst John Vinh, of KeyBanc Capital Markets, reiterated his Overweight rating for Nvidia (ticker: NVDA) stock and raised his price target to $375 from $320.

“Nvidia remains uniquely positioned to benefit from AI/ML secular data center growth within the industry,” Vinh wrote Sunday. “The disappointing launch of the [gaming card] RTX4070 could result in a modest miss in gaming, we anticipate investors will look through these concerns.”

In midday trading Monday, the stock was up 0.2% to $313.34.

Nvidia chips have high exposure to generative AI, which has been trending this year. The technology ingests text, images, and videos in a brute-force manner to create content. Interest in this form of AI was sparked by OpenAI’s release of ChatGPT late last year.

The analyst said Nvidia will benefit from robust sales from its latest data center H100 product and the rollout of future gaming cards. While the chip maker is trading at an elevated valuation of 48 times his fiscal 2025 earnings estimate, he believes it is justified.

“We believe NVDA’s outsized share position and ability to monetize growth in generative AI at 70%+ GM [gross margin] should warrant a meaningful premium vs. its semiconductor peers,” he wrote.

Wall Street analysts have a positive view on Nvidia. About 74% have Buy or equivalent ratings on the stock, according to FactSet.

The chip maker is scheduled to report its fiscal first-quarter results Wednesday.

Write to Tae Kim at tae.kim@barrons.com