BofA analyst Vivek Arya reiterated a Buy rating and a $375 price target (71.1% upside) on NVIDIA Corp (NASDAQ: NVDA) and a Top Pick designation.
Arya saw the Baird downgrade-related selloff as likely done. Truist also slashed the price targets on the chipmakers.
Arya acknowledged that Nvidia's gaming business was vulnerable to weaker demand from Europe due to the Russia-Ukraine crisis and the China lockdown impact.
Crypto customers could be affected by the Ethereum price declines and change to proof-of-stake, which does not require graphics cards.
Nvidia also appears to be supply-constrained, as the company boosted its inventory commitments to its foundry partners, Taiwan Semiconductor Manufacturing Co Ltd (NYSE: TSM) and Samsung Electronics Co Ltd (OTC: SSNLF).
The tailwinds included strength in the data center, pro-viz and 2H autos ramp, upcoming new Hopper-based gaming product cycle in 2H, and restocking of gaming channel inventory.
Arya acknowledged the slowing demand in the PC gaming market due to headwinds related to Europe, China, and Ethereum.
Arya saw a more significant upside potential as "incremental capacity can be directed to Nvidia's business's more profitable (data center, pro-viz) parts."
With these headwinds mostly priced in NVDA stock, Arya continues to advocate for a recovery in shares.
Arya continues to see Nvidia as a leading growth company in semis given its ability to grow sales in high entry-barrier computing markets at a 20-25% CAGR (3x semis industry growth), maintaining industry-leading 45%+ EBIT [margins]."
Price Action: NVDA shares traded lower by 2.51% at $213.67 on the last check Tuesday.
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