Benzinga - by Adam Eckert, Benzinga Staff Writer.
Constellation Research founder and principal analyst Ray Wang expects Nvidia Corp (NASDAQ:NVDA) stock to hit $200 per share in the next 12 months.
The analyst provided seven reasons behind the call Monday on CNBC’s “Squawk Box.”
Visionary CEO: Wang believes Nvidia CEO Jensen Huang is a visionary poised to set the chipmaker up for continued success. He suggested that every great Silicon Valley story starts with a great leader.
High Barrier To Entry: It takes a long time to get a chip to market and there are very few competitors who are currently able to offer something in the same realm as Nvidia. Wang believes legitimate competition is going to remain scarce.
High Switching Costs: “Once you’re in, you’re locked in because of the CUDA software. In order to access the chips, the software and the entire stack, you’re going to be locked in for quite some time,” Wang said.
Dominant Market Share: Nvidia is in a dominant market share position for AI chips as the company is at least 24 months ahead of its competitors, Wang said. Last week, BofA Securities noted that Nvidia currently holds at least 80% of the AI hardware market.
Product Roadmap: “We’re only seeing 1/10th, maybe 1/100th of the product roadmap that Nvidia has out there and that’s really exciting for those who actually have some insight into what they have next because it’s more than just chips,” Wang said.
Nvidia Ecosystem: The analyst noted that Nvidia has created an ecosystem of products which makes its GPUs the default standard for AI, inference and testing.
Numbers Don’t Lie: The earnings have been able to keep up with the remarkable surge in Nvidia shares over the last two years. Wang highlighted 262% revenue growth and gross margin of 78% and noted that he expects the climb in Nvidia shares to continue over the next 18 to 24 months.
Why It Matters: Wang has a price target of $200 on Nvidia stock and sees the current pullback as a buying opportunity.
“The pullback is coming at a macro level. People were worried about the consumer side, people were worried about where the economy was going to head and they’re doing some profit taking before the summer so I think it’s a good time to buy the dip,” Wang said.
The Constellation Research analyst told CNBC that the rally in Nvidia shares is much different than what we saw during the internet boom because it’s much less concentrated. Nvidia learned from the dot-com bubble and realized it needed to go much broader than building just chips, Wang said.
“What Nvidia has done is built partnerships that are going to last the next era. And so in the age of AI, we actually believe AI begins and ends with Nvidia because they’ve actually built out a roadmap that is much more encompassing than where networking was, where software was. They actually see that end-to-end vision,” Wang said.
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NVDA Price Action: Nvidia shares were down 4.42% at $120.96 Monday afternoon, according to Benzinga Pro.
Photo: Shutterstock.
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