01:51 PM EDT, 06/16/2023 (MT Newswires) -- Nvidia (NVDA) is the only company in the semiconductor space that is expected to beat and raise this year due to artificial intelligence prospects, with its stock likely to trade at a premium to peers amid upward potential in the near term, Morgan Stanley said Friday.
The firm named Nvidia as its top pick among semiconductor stocks, replacing Advanced Micro Devices (AMD), Morgan Stanley analysts including Joseph Moore said in a note. They increased their price target on the Nvidia stock to $500 from $450 and on AMD to $138 from $97, saying they remain overweight on both stocks.
"We do see continued growth in the (Nvidia) data center business, in a multiyear trajectory that should be clearly above all other compute players on a composite basis, given there is no offsetting or cannibalized compute business outside of the AI business," the analysts said. Nvidia is the "cleanest story" in AI hardware and continues to deserve more consideration from investors seeking AI exposure, they added.
"While we have been positive since upgrading the stock earlier in the year, we were nowhere near as optimistic as we should have been; we had articulated a $40 (billion) data center business in (2026), but (Nvidia) will see that run rate later this year," the analysts said.
The firm previously named AMD as its top pick amid expectations that its server market share gains will drive outperformance within the group amid a tough macro environment, though "that story hasn't necessarily played out thus far in the first half," according to the analysts. However, the company's server business is likely to remain on a share-gaining path in the longer term as firms expand budgets to accommodate both AI investments and legacy infrastructure upgrades, they added.
Although Intel (INTC) has material AI opportunity, its larger legacy server business poses "more meaningful headwinds" to the company as cloud budgets adjust to higher levels of AI spending, Morgan Stanley said.
"We see the principal near-term opportunities from Habana Labs/Gaudi, specialty silicon that the company acquired a couple of years ago, that could drive material revenue in inference next year," the analysts said, discussing Intel. "For AI to drive stronger growth overall, we will need a recovery in servers spending to drive revenues back to a profitable level."
While Wall Street's consensus for Marvell Technology's (MRVL) 2024 revenue has remained more or less steady, it has been revised down for 2025, "where we would say there is still very little visibility," according to the analysts. This suggests the overall business is "not as clear a beneficiary of the 2x growth they characterize for their AI-driven business because of the other products categories the AI business is cannibalizing."
Morgan Stanley raised its price target to $38 from $31 on the Intel stock and to $68 from $55 for Marvell.
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