Citi Reiterates Buy on NVIDIA, $180 Price Target

Citi analyst Atif Malik reiterated a Buy rating and $180 price target on NVIDIA (NASDAQ: NVDA).

“– All about AI: Company is laser focused on the AI enabling part of networking.

Nvidia has one networking operating system to optimize compute and storage with the focus to generate the lowest TCO for tokens per second per user. Dynamo is the operating system of the AI factories.

Mellanox stopped working on campus switches to focus on AI switches after acquired by Nvidia as telco/web scale responses are different from AI agentic flows. – Spectrum-X Sales: Double-clicking on networking in the recently reported 1Q, the segment saw a strong 64% QoQ growth to $5B in 1Q.

The growth was seemingly broad based going from scale out to scale up products.

On scale up, the company reached $1B+ with its NVLink solutions while on scale out the company continues to gain traction on its Spectrum-X (Ethernet) portfolio with two new customers.

Spectrum -X quarterly run-rate of $2B includes both NICS and switches. – Infiniband vs Ethernet: Ethernet is evolving while Infinband is still the gold standard.

Hyperscalers are asking for Ethernet due to familiarity reasons and Nvidia has strong Spectrum X capabilities.

While merchant suppliers like Arista’s EOS system are trying to pivot over to AI from front end/classic data center switching, it helps to have the entire stack in Nvidia’s case.

Majority of Broadcom’s activity in the market is on Tomahawk vs Jericho platform which has programmability but adds latency. – NVLink: NVLink is a sale up platform inside a rack and is extremely specialized for AI.

It connects a bunch of GPUs (72) via cache coherent interface. Bigger LLM models benefit from larger scale up of GPUs and sometimes the developers build the model to the hardware GPU stack.

Customers don’t have to buy the entire stack from Nvidia and can buy what they need like super NICS, switches, and now NVLink Fusion for semi-custom AI infrastructure. – Co Packaged Optics (CPO): NVLink has over three miles of copper cable.

Copper is low power and cheap.

However, the reason to do scale out CPO is because 10-15 inches of copper on the PCB can create a lot of noise which requires additional DSP and retimers.

To avoid this, put optics right next to ASICs and convert the signal to optics removing DSP and retimers.”

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