Report written by Chaim Siegel of Elazar Advisors, LLC
We’re moving to a Buy Rating on Nvidia. The main driver for Nvidia is Data Center. The company said on their last earnings call that Data Center should accelerate this quarter and continue to accelerate through the year. Running that through to 2024 gets me nice EPS above the Street and based on it’s historical PE gets the target to almost $400.
Stocks move on earnings multiplied by the Price-to-Earnings the market typically pays for a stock. The Street’s at about $6.00 for 2024 but I think it can be over $8.00 based on the company’s Data Center comments along with the company saying AI is at an ‘inflection point.’
If you assume a continued Data Center acceleration as the company called for it implies big sequential growth (Q2 growth versus Q1) starting in Q2 which we’ll listen for in their guide in their next earnings report.
China Risk
China is important to Nvidia and so is a risk given China and the US back and forth geopolitically. But I would guess that China also needs to order from Nvidia. China can play games with Micron geopolitically because there’s other DRAM sources, but they probably can’t afford to not order from Nvidia in this AI-tech-race. There isn’t the strong non-US competitor that they can go to.
The Coming AI Stock Market Darling, Nvidia
I’m upgrading Nvidia after thinking further about my comments to subscribers yesterday that I said, “I think AI can be a big boost for the market and tech in general and NVDA should be a the center of that benefit…
I have a new belief that AI can hype tech stocks to some degree similar to what internet did in the ’90s. Investors will over-value things at some point based on the potential of a huge lift in ‘productivity’ and we are nowhere near those type of expectations. It’s yet to come. Since you’re not even hearing anything like that it means it is nowhere near potentially priced in. One or two pie-in-the-sky ‘AI productivity’ calls would be only the beginning. When it’s in every stock then we’re nearer a peak. Again, we’re not even close to that but I think this is another reason that can hype this market higher.”
Nvidia’s at the center of all that potential so could be the stock market ‘darling’ of this potential coming market boom. And Nvidia is not currently expensive on next year’s numbers which people will swivel to look at soon.
This report was written by Chaim Siegel who leads Elazar Advisors, LLC. Chaim has decades of experience working with and for large hedge funds. Chaim previously worked for renowned trader Steve Cohen as well as being a partner of a George Soros funded hedge fund, JLF Asset Management. Chaim also worked for a $13B fund at Morgan Stanley. Chaim’s taken his institutional experience to a more public product predicting stock, bitcoin, commodity and stock market moves here.
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