- BofA analyst Vivek Arya reiterated a Buy rating and a $375 price target (71.1% upside) on NVIDIA Corp (NASDAQ:NVDA) and a Top Pick designation.
- Arya saw the Baird downgrade-related selloff as likely done. Truist also slashed the price targets on the chipmakers.
- Arya acknowledged that Nvidia's gaming business was vulnerable to weaker demand from Europe due to the Russia-Ukraine crisis and the China lockdown impact.
- Crypto customers could be affected by the Ethereum price declines and change to proof-of-stake, which does not require graphics cards.
- Nvidia also appears to be supply-constrained, as the company boosted its inventory commitments to its foundry partners, Taiwan Semiconductor Manufacturing Co Ltd (NYSE:TSM) and Samsung Electronics Co Ltd (OTC: SSNLF).
- The tailwinds included strength in the data center, pro-viz and 2H autos ramp, upcoming new Hopper-based gaming product cycle in 2H, and restocking of gaming channel inventory.
- Arya acknowledged the slowing demand in the PC gaming market due to headwinds related to Europe, China, and Ethereum.
- Arya saw a more significant upside potential as "incremental capacity can be directed to Nvidia's business's more profitable (data center, pro-viz) parts."
- With these headwinds mostly priced in NVDA stock, Arya continues to advocate for a recovery in shares.
- Arya continues to see Nvidia as a leading growth company in semis given its ability to grow sales in high entry-barrier computing markets at a 20-25% CAGR (3x semis industry growth), maintaining industry-leading 45%+ EBIT [margins]."
- Price Action: NVDA shares traded lower by 2.51% at $213.67 on the last check Tuesday.
