Nvidia’s (NVDA) Analyst Day Spotlights the Value of an Ecosystem, But the Stock Is Overvalued, Says Needham

Nvidia’s (NVDA) physical products are accelerators (for third-party hardware) and the company’s own GPU-powered workstations and servers. But it’s the company’s GPU-optimized software that’s laying the groundwork for emerging applications such as autonomous vehicles, robotics, and AI. Nvidia has created an ecosystem over the past 10+ years and a business model that leverages its software expertise above and beyond its leading- edge silicon designs.

During NVIDIA’s 2019 Analyst Day, the company emphasized the importance of an ecosystem to tackle the challenges of AI and Autonomous Driving.

Needham analyst Rajvindra Gill opined, “NVDA’s accelerated computing platform offers a programmable architecture and unified CUDA software platform that allows companies to run diverse AI-workloads across disparate systems. While we are encouraged with the recent announcements with Toyota and AWS, we are still skeptical of a “sizable” 2H19 rebound in data center spending. Moreover, we remain cautious on GPU demand heading into C2Q19, post-cryptocurrency the bust and question the snapback in the consumer demand in China. Lastly, the stock has rebounded over 30%+ in the past month and is now trading close to its multi-year highs at P/E 25x-28x. During this uncertain macroeconomic climate, we are avoiding high-valuation names.”

Therefore, Gill remains bearish on NVDA stock with an Underperform rating. (To watch Gill’s track record, click here)

All in all, Nvidia has a large moat around certain markets, like autos, and aims to create a similar ecosystem in AI and robots. Based on the word of the Street, Gill seems to be the sole bear running loose here. NVDA is one of Wall Street’s favorite stocks, considering TipRanks shows a bullish vote from 20 analysts polled in the last 3 months. The stock’s consensus target price stands at $187.52, which implies about 8% upside from current levels. (See NVDA’s price targets and analyst ratings on TipRanks)


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