Nvidia shares close 4% as analysts say data center growth “has room to run”

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Nvidia forecast revenue of $ 6.666 billion to $ 6.94 billion on Wednesday, above Wall Street estimates at the time, and said the “lion’s share” of the $ 500 million increase will come from data center sales. This follows the new records of total revenue, gaming and data center that Nvidia reported during the quarter.

What many analysts picked up on is that the demand for graphics processing units (GPUs) for cryptocurrency mining did not take both prospects into account. This was a relief for analysts, who noted a lower risk of cryptocurrency compared to 2018, when a fall in cryptocurrency values ​​caused many miners to sell their gaming card-powered platforms, flooding the market with second hand cards.

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Nvidia blasted sales of its Cryptocurrency mining processors, or CMPs, which are meant to divert mining demand from GPUs created for gamers and are not expected to be significant in revenue gains.

However, data center sales attracted much more attention from analysts. Bernstein analyst Stacy Rasgon, who has a higher rating than the stock and raised its price target to $ 230 from $ 180, said that while “the company has absolutely no problem continuing crushing games, “Nvidia’s data center story” still seems to have some room to run. ”

“The history of the data center is coming into reality right now, with considerable short-term inflection and the possibility that the segment could match and potentially outperform games in the not-too-distant future,” Rasgon said.

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Evercore ISI analyst CJ Muse, who has a top performance and a $ 250 price target, described the data center’s sales as “key to action.”

“Data center revenue was guided to accelerate Q3 compared to a very strong composition based on strength between vertical and hyperscale customers, training and inference applications, and computing and networking technologies: the democratization of payloads of AI work remains a central issue “. and one that we see Nvidia driving and benefiting from for the foreseeable future, ”said Muse.

Cowen analyst Matthew Ramsay, who has outperformed the rating and raised his price target to $ 220.00, from $ 176.25, said the data center’s acceleration was “food for most important takeaway “from the earnings call.

“We expect product cycles from sustainable data centers and games that should generate> 50% + organic growth for the company in F’2022,” Ramsay said.

Jefferies analyst Mark Lipacis, who has a buy rating and raised his price target to $ 223 from $ 214, addressed the lower risk of another debacle in cryptographic mining.

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“We believe crypto-miners are one-tenth of gaming GPU sales compared to 2018,” Lipacis said. “We continue to believe that the risk of a crypto-based gaming problem is low and we expect the Nvidia ecosystem gap and growing software revenue to lead to additional upside surprises.”

Of the 41 analysts covering Nvidia, 34 have buy ratings, five have hold ratings and two have sell ratings. Of those, at least 24 analysts raised their price targets in response to earnings and one lowered their target, according to FactSet. This resulted in an average price target of $ 219.23, compared to the previous $ 204.24.

Nvidia, which has become the largest chip maker in the United States by market capitalization, around $ 500 billion, larger than Intel Corp. INTC,
+ 0.48%,
Advanced Micro Devices Inc. AMD,
+ 0.25%,
and Micron Technology Inc. MU,
-0.48%
combined.