Nvidia faces an ever-higher bar. How Morgan Stanley says to play its stock.

By Emily Bary

Morgan Stanley isn't 'pounding the table' on Nvidia shares but still sees some upside

Morgan Stanley analyst Joseph Moore is still upbeat about Nvidia Corp.'s stock, but he acknowledges a nuanced picture in the wake of a big run-up and as the company prepares to start shipping its new Blackwell chip.

While he boosted his price target on Nvidia shares (NVDA) to $144 from $116 on Monday, that new target implies only 17% upside from Friday's close. Other recent price-target bumps on Wall Street have been $150 or above.

"We aren't pounding the table at these levels given the sharp appreciation since the last earnings report, but this remains the most compelling narrative in the AI semis space, and as we transition from H100 to H200 and then Blackwell, visibility and backlog will improve materially," Moore wrote.

Nvidia faces a "higher bar" nowadays, according to Moore, given the sharp rise in the company's market capitalization since its last earnings report in late May. Nvidia's valuation has swelled by about $700 billion since then.

See also: Nvidia has added $1.8 trillion of market cap in 2024. Here's how big that is.

Moore pointed to "positive data points from both our Taiwan trip and our China trip that keep us confident on near term [numbers]," he wrote. In his view, "the catalyst path remains strong, as the very strong surge in H20 builds & demand removes any concern for us about a pre-Blackwell pause." Blackwell is the company's new chip lineup that will start shipping later this year.

Read: Nvidia's stock is set to gain as rivals play perpetual catch-up, analyst says

Still, there are some puts and takes that he says investors should keep in mind. For one, the company is "at the tail end of the Hopper cycle, and the frothiness and visibility is lower than it was." Yet at the same time, "demand-side indications remain robust for Hopper," and he thinks that older products will make up the bulk of Nvidia's revenue through the early part of next year, even though Blackwell shipments could kick off in the October quarter of this year.

"Customer enthusiasm for Blackwell continues to be strong, with ... the strong boost in inference performance driving customer interest," Moore wrote. "The supply ramp appears to be going well, though our contacts report that the exceptional complexity of Blackwell cards and racks can be a challenging ramp."

Read: Nvidia is one of the 'three horsemen of AI.' Here are the others.

-Emily Bary

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07-01-24 1448ET

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