Here’s Why Craig Ellis Came Away More Enthusiastic on NVIDIA Corporation (NVDA) Following Yesterday’s Supercomputing Trade Show

FBR's Craig Ellis anticipates NVDA could double or triple a current forecast of 25% in annual growth come F2019.


FBR analyst Craig Ellis is out with a confident research note on NVIDIA Corporation (NASDAQ:NVDA) after hearing CEO Huang and CFO Kress share insights at the Supercomputing 2017 trade show yesterday.

Now, this bull is meaningfully more enthusiastic on robust Data Center growth momentum within a SAM 15 times the segment’s $2.0 billion sales run-rate today. Additionally, Ellis bets “that a tipping point of adoption may be at hand within the $4.0B high performance compute (HPC) sub-segment.”

In reaction to a clear acceleration in a $4 billion high performance computing and a $30 billion data center market, the analyst maintains a Buy rating on NVDA stock with a price target of $270, which represents a 26% increase from where the stock is currently trading. (To watch Ellis’ track record, click here)

Ellis elaborates, “Indeed, while modeling 25% F19 y/y growth, we believe 2-3x that is possible as workloads continue migrating to NVDA aided by new products, enabling software, and a sharply expanding developer ecosystem.”

Between Nvidia’s compelling, upgraded roadmap and a slew of new products that the management team is executing quite well, the analyst did not need “formal guidance” to look forward to clues that might “foreshadow” a Volta follow-on next year and an evolution for the just-revealed Pegasus system to one day take a size step back to a single-chip solution. Additionally, new feature upgrades like tensor cores appear “readily applicable,” the analyst highlights.

In a nutshell, “Systems capabilities such as NVLink continue to go underappreciated in our view, with the interconnect saving Infiniband networking cost and enabling speed-optimized 2-8 GPU performance in DGX and HGX systems. These integrated systems with embedded frameworks and protocol stacks are replicated by hyper-scale, HPC, government (i.e. Summit and Sierra supercomputer systems) and select enterprise systems to a degree we’ve not previously seen at NVDA. In our view, that foreshadows rapid and broad-based training, inferencing and HPC penetration which could potentially sustain the segment’s +100% y/y growth rate for years to come,” Ellis contends.

A great deal of cautious optimism circles the chip maker, with TipRanks analytics exhibiting NVDA as a Buy. Based on 26 analysts polled by TipRanks in the last 3 months, 14 rate a Buy on Nvidia stock, 11 maintain a Hold, while 1 issues a Sell on the stock. The 12-month average price target stands at $215.17.