Nvidia Corp. shares suffered their worst day in nine months Friday, but Cantor Fitzgerald analyst C.J. Muse is feeling as upbeat as ever.
He boosted his price target on Nvidia's stock $(NVDA)$ to $1,200 from $900 over the weekend, writing that the company's annual GTC conference, which kicks off next week, could shine a light on growth opportunities, including for some of Nvidia's more under-the-radar businesses.
Muse's new target is among the highest listed on FactSet and implies 37% upside from current levels.
Nvidia's software business has achieved a $1 billion annual run rate, but that's still a drop in the bucket for a company that hauled in upwards of $60 billion in overall revenue last fiscal year and that's expected to easily cross the $100 billion total-revenue mark this fiscal year.
The software business "is only in the [first] inning," according to Muse, who expects Nvidia to spend a "tremendous" amount of time at GTC outlining the expansion potential in software. He thinks Nvidia's management team will be most excited about the opportunity for the company's AI Enterprise offering, which is meant to make AI more accessible.
Additionally, Muse expects an emphasis on the potential of inference applications. Inference in artificial intelligence occurs when systems make predictions based on data that are new to them
He said many on Wall Street seemed surprised when Nvidia revealed that at least 40% of demand for data-center graphics processing units over the past 12 months came from inference, but in hindsight, that might make sense considering Meta Platforms Inc. and Microsoft Corp.'s pushes there.
"[W]e continue to expect NVIDIA to surprise to the upside with its share of the inference market," Muse wrote.
GTC will likely feature the official announcement of Nvidia's next data-center product, the B100 chip that's expected to offer double the performance of the H200. Muse is intrigued to see what customers do with their old A100 and H100 clusters once they upgrade to B100.
Overall, he's enthused about the company's revenue and earnings potential going forward, offering that GTC could come with "a clear vision to NVIDIA being sold out through 2024, a clear product cycle supporting another growth year in 2025 (B100 and others), and a vibrant ecosystem ripe to monetize the tremendous opportunities as we approach a tipping point in generative AI."
In his view, it's not outlandish to believe 10% to 15% of servers could be accelerated "into the 2025 timeframe," and he thinks Nvidia's stock could command a fair value of $1,200 to $1,400 "once investors gain conviction 2025 is not a peak year."