JPMorgan Affirms Overweight on NVIDIA, $170 Price Target

JPMorgan analyst Harlan Sur reiterated an Overweight rating and $170 price target on NVIDIA (NASDAQ: NVDA).

“NVIDIA held its financial analyst event yesterday following the GTC keynote presentation (see our takeaways here) from Tuesday.

The team highlighted its strong ecosystem, which includes silicon, system hardware, software, customer partnerships, and an extensive installed user/developer base, demonstrating how it is well-positioned to capture a higher percentage of the $1 trillion in annual data center spending.

Additionally, the team believes that spending from AI factories represents upside optionality, as it is currently not included in the data center infrastructure forecast.

They expect AI factory projects to be valued in the hundreds of billions of dollars.

The team asserts a strong competitive advantage over ASIC solutions due to its comprehensive system solutions, software stack, ecosystem, and ease of adoption.

They believe that competitors are still trying to catch up to the last-generation Hopper GPU architecture, while NVIDIA is already ahead with its Blackwell architecture, which offers 40x better performance.

The team emphasizes that it’s not just about cost savings, where they claim the best total cost of ownership (TCO), but also about revenue generation, highlighting a performance advantage over custom ASIC solutions with the Blackwell architecture.

NVIDIA remains focused on its software strategy, which helps open up new markets and is particularly important in the inference market.

The team believes that demand for inference will surpass that for training, potentially accounting for 90% of the market in the long term.

The reasoning model is 100 times more complex than the one-shot pre-trained AI model.

The architectural change from Hopper to Blackwell was complex and introduced changes to the system and networking architecture which impacted the gross margins.

However, the team expects to retain a similar architecture over the next 3-4 years, which should allow them to drive yield improvements and a better margin profile (mid- 70%).

We are encouraged by the market growth opportunities and, more importantly, NVIDIA’s ability to leverage its silicon architecture across multiple end-markets and applications.

This is supported by investments in software and ecosystem development, driving gross margin, operating margin, and earnings per share expansion. We reiterate our Overweight rating on NVDA.”

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