Nvidia Corp’s valuation. “have moved into the stratosphere based on short-term numbers,” but Morgan Stanley still sees the stock as an attractive way to enter the semiconductor sector.
Morgan Stanley’s Joseph Moore upgraded the stock from balanced to overweight late Thursday, cheering the opportunities presented by enthusiasm around innovative artificial intelligence. It’s the kind of AI popularized by Chatbot ChatGPT by OpenAITheir hype has prompted companies across industries to seek AI links in their own businesses.
Read more: Tech executives aren’t just starting to talk about AI – they’re talking about it more
Nvidia
NVDA,
could help power these applications, one reason Moore feels more optimistic about the name.
“The high capital-intensiveness of these workloads, especially in terms of training, is now a big part of the math for the biggest tech companies, with NVIDIA dominating,” he writes. the training market is likely to last for several years.” .
Read: As chip sales dry up, Nvidia CFO says spending on AI will save companies money
Moore previously sidelined Nvidia because of worries about data center and gaming trends. That momentum, he wrote on Thursday, “has largely worked,” adding that “the rise of next-generation AI is too many big trends to be distracted by tactical concerns.”
He added that the excitement around big language models, which use machine learning to understand language, “is translating into stronger spending both in the short and long term.”
Do not miss: According to Wall Street analysts, Nvidia’s hot streak in the stock market is far from over.
Moore referred to what he considers to be a sky-high valuation for the stock, which he says is “trading at a higher P/E than our entire universe.” But he also noted that “the semiconductor group as a whole has recovered to the point where there are few bargains in sectors with long-term growth potential even under tough conditions.”
When thinking about trends over the next five years, Nvidia stock is still expensive, “but not too far from its peers,” he argues. He reasoned that there is even a chance that Nvidia will win over the rest of the computing world as companies face budget pressures but recognize the importance of investing in AI.
Moore wrote that “cloud providers will cut spending on traditional workloads to fund increasingly intelligent AI models.”
Read: OpenAI launches ‘safer’ AI, GPT-4; Morgan Stanley one of his first clients
He raised his price target to $304 from $225 on the stock, up 1.3% in Friday morning trading.
Nvidia stock is up 77% year-to-date, as the S&P 500
SPX,
has increased by 2%.
