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Analyst Says Nvidia Is A Strong Play For The 'Post-Smartphone Era'

GOOG, MSFT, NVDA, AMD, META | May 2, 2017

While tech giants Microsoft Corporation (NASDAQ: MSFT), Facebook Inc (NASDAQ: FB) and Alphabet Inc (NASDAQ: GOOG) continue to invest in machine learning technology, Global Equities Research analyst Trip Chowdhry said NVIDIA Corporation (NASDAQ: NVDA) will be a direct beneficiary of the growing graphics processing unit requirements associated with the technology.

In a note to clients, Chowdhry said Nvidia’s core business is strong and machine learning will serve as the next long-term catalyst for investors.

Analyst Commentary

“NVDA is strongly positioned to capitalize on the post-smartphone era, with the emergence of machine learning/deep-learning-based intelligent systems [...] Customers continue to run NVDA GPU farms at full-allocation which means that customers are running out of NVDA GPU capacity, which further means that the demand for NVDA GPUs in machine learning/deep learning continues to remain strong,” Chowdhry explained.

Back in 2015, Nvidia abandoned its smartphone modem business as part of its strategy to focus on gaming, automotive and cloud computing technology. The pivot was perfectly timed. Since Nvidia made the shift, shares have skyrocketed 370 percent.

Not everyone on Wall Street is as bullish on Nvidia as Chowdhry.

In February, Pacific Crest analyst Michael McConnell wrote that he was concerned about Nvidia’s peaking GPU market share declining operating margins and premium valuation. Pacific Crest assigned a fair market value of $99 per share for Nvidia, slightly below where its shares are trading today.

Chowdhry said the machine learning era will be a “non-event” for Nvidia rival Advanced Micro Devices, Inc. (NASDAQ: AMD).

Nvidia is expected to report Q1 earnings on May 9.