Shares of chip maker Nvidia Corp. (NVDA) caught a break this week after one team of analysts upgraded the semiconductor manufacturer ahead of its quarterly earnings results slated for Nov 15.
Nvidia, Xilinx to Gain on Burgeoning AI Inferencing Market
In a note to clients, Susquehanna analyst Christopher Rolland lifted his rating on shares of the Santa Clara, Calif.-based tech company from neutral to positive, arguing that the recent sell-off in Nvidia stock, amid larger weakness in the chip sector and even broader turmoil for global markets, is overblown, as outlined by MarketWatch. Rolland attributed his upbeat forecast to the chip maker's long-term opportunities in various high-growth markets.
Susquehanna is particularly bullish on Nvidia's position in the Artificial Intelligence inferencing space — which the chipmaker describes as "taking smaller batches of real-world data and quickly coming back with the same correct answer" — a market that analysts expect will grow to reach $6.5 billion by 2025.
"While inferencing is mainly addressed by CPUs today, recent GPU and FPGA platforms appear to be bona fide challengers," wrote the Susquehanna analyst.
In the recent quarter, Nvidia launched new products with graphics processing units based on its new Turing architecture, which will replace the firm's most recent line of GPUs. Nvidia's Pascal GPUs were the most profitable generation in the firm's history.
Despite long-term bullishness, Susquehanna cut its 12-month price target on Nvidia stock from $250 to $230, implying a 13% upside from Wednesday morning. Roland expects weaker-than-expected outlook, yet indicates that "implied valuation discounts an excessively severe downside scenario."
Trading up 2.2% at $203.72, NVDA stock reflects a 5.3% gain YTD, outperforming the iShares PHLX Semiconductor ETF's (SOXX) 3.6% loss and the S&P 500's 2.5% return over the same period.
Moving forward, investors will be watching Nvidia's earnings results on Thursday, in which the company will offer the first glimpse into how its new GPU products are selling.
Susquehanna also upgraded shares of Xilinx (XLNX) from neutral to positive, highlighting its FPGA platform's flexibility, low latency, and power advantages. Rolland expects shares of the San Jose, Calif.-based semiconductor company to jump nearly 13% over 12 months to reach $95.