Goldman adds Nvidia to conviction list
Nvidia will be the principal “shovel supplier” in the artificial intelligence “gold rush,” according to Goldman Sachs, which added the technology giant to its conviction list.
Nvidia will maintain its status as the “accelerated computing industry standard for the foreseeable future given its competitive moat and the urgency with which customers are developing and deploying increasingly complex AI models,” Goldman’s Toshiya Hari said.
The firm’s $605 price target implies a 39% potential return,and is up from $495. Shares are up more than 200% year-to-date as Nvidia (NVDA) emerges as one of the top beneficiaries of the AI chip boom. Sales for the most recently reported quarter totaled $13.5B, more than $2B the average analyst estimate.
The company will remain a standard for the foreseeable future “given its competitive moat and the urgency with which customers are developing and deploying increasingly complex AI models,” Goldman’s Hari wrote in a note.
The firm also added Okta (OKTA), Cintas (CTAS) and Quanterix (QTRX) to the list and removed Salesforce (CRM) and Johnson Controls International (JCI).
Data center strength is also not abating anytime soon, with sales in the segment almost tripling year-over-year for the July quarter.
Improving supply chain issues and margin expansion are other positives for Nvdia (NVDA). The latter should drive additional buybacks.
Goldman’s profit expectation for 2024 of $18.7B is 15% higher than consensus, with the Street underestimating the potential gross margin uplift stemming from improving mix as well as the opex leverage that is inherent in NVDA’s GPU platform-based business model.
Okta (OKTA) also made Goldman’s list with analyst Gabriela Borges calling the company a “market leader in identity protection software that CIOs have been prioritizing over the past 12 months.”
The company is also turning around the mis-executed merger of a 2021 acquisition that should result in a significant rebound in growth and further expansion in profitability.