Graphics-chip maker Nvidia (NVDA) is seeing sales of data center processors starting to pick up as demand increases from cloud computing services and enterprises. Nvidia stock rose on Tuesday.
“We’re convinced that data center (business) has begun to reaccelerate due to hyperscale digestion, a resumption of enterprise activity and rising virtualization,” Raymond James analyst Chris Caso said in a note to clients on Tuesday. Caso said his assessment is based on channel checks and conversations with Nvidia management post-earnings.
Caso reiterated his strong buy rating on Nvidia stock and and raised his price target to 900 from 750.
In midday trading on the stock market today, Nvidia stock climbed 2.3%, near 753.80.
Nvidia Leads In Artificial Intelligence
Caso also likes Nvidia’s position of strength in the artificial intelligence field.
“Longer term, we don’t see credible threats to Nvidia’s dominance in AI, which we believe will allow them to continue the track record of a 27% revenue CAGR (compound annual growth rate) over the past six years,” Caso said.
In the gaming chip business, Nvidia remains constrained on supplies, though the situation is improving, he said.
“In gaming, we think increased supply and price increases will lead to upside in second-half 2021,” Caso said.
Meanwhile, Caso doesn’t expect Nvidia’s planned acquisition of chip designer Arm to get approved by government antitrust regulators.
Nvidia and Arm executives went on a public relations offensive recently, touting the competitive benefits from the deal. The two companies hope to complete the transaction in early 2022.
Nvidia Stock Is On Three IBD Watchlists
On May 28, Nvidia stock broke out of a cup base at a buy point of 648.67, according to IBD MarketSmith charts. Nvidia stock is now extended beyond the 5% buy zone of its breakout. It notched a record high of 775 last Friday.
Nvidia’s breakout happened two days after the company reported better-than-expected results for its fiscal first quarter and guided higher for the current period.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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