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Jefferies’ Bullish Take on NVDA Stock

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Nations have long invested in domestic infrastructure to take advantage of emerging technologies and boost their economies. Today, AI is the most important technology, turbocharging innovation everywhere and producing enormous economic gains. This is why countries are now investing in “sovereign AI” which is the development of AI technologies in order to harness their benefits for governments.

Back in February, Nvidia (NASDAQ: NVDA) CEO Jensen Huang stated that every country needs sovereign AI, saying that it codifies culture, a society’s intelligence, common sense, and history. As more countries answer Huang’s call for sovereign AI, Jefferies analyst Blayne Curtis believes that the company will continue to dominate the AI market, and he remains bullish on NVDA stock.

Nvidia’s Nine New Supercomputers

Nine months after the unveiling of Nvidia’s Grace Hopper Superchip, nine new supercomputers around the world are using the chip. Nvidia also took the event as an opportunity to discuss its progress in helping individual nations around the world set up their own “sovereign AI” programs. Additionally, it shed light on how it is working with quantum computing partners to enable accelerated supercomputing at three major supercomputer sites.

One supercomputer that was mentioned is the UK’s Isambard-AI, which is referred to as the emblematic of the “sovereign AI” movement, a recognition by individual nations around the world that AI can be of strategic and cultural importance to them, motivating them to own and host more of their own AI-related data, infrastructure, and workforces to foster innovation. Dion Harris, head of data center product marketing at Nvidia, said that Isambard-AI is one of the most efficient supercomputers ever built, and he added that when it’s enhanced by an additional 5,280 Grace Hopper Superchips, as planned for this summer, its performance will increase by about 32x.

This supercomputer will be used to advance data analytics, drug discovery, climate research and many more areas. The UK is not the only nation that is currently pursuing sovereign AI. In fact, the Gefion supercomputer in Denmark, which has 1,528 H100 chips, and the Jean Zay supercomputer in France, which has 1,456 H100s, also fit with the sovereign AI mission. These supercomputers are a sign that countries are taking what Jensen Huang said very seriously, and this indicates that there’s a new opportunity for Nvidia in a market that not many investors pay attention to, but it’s actually growing massively.

Massive Growth Potential for NVDA Stock

The global AI in governments and public services market is projected to expand at a compound annual growth rate of 16.9% from 2023 to 2030, reaching a value of $51.78 billion that year. Nvidia already has 90% of the AI server market, so it won’t be too surprising if it ends up capturing a massive percentage of the sovereign AI market as well.

This might sound a bit optimistic, but if Nvidia manages to capture 90% of this market, it could generate an extra $45 billion in revenue by 2030, and since Nvidia is known for smashing expectations, investors can’t really rule that out. Therefore, there’s no denying that Nvidia still has more room to grow, and this is an opinion shared by many analysts on Wall Street, including Jefferies analyst Blayne Curtis, who recently put a bullish price target on NVDA stock.

Analysts Bullish on NVDA Stock

Jefferies analyst Blayne Curtis said in a very recent research note that he believes it’s too early to sift out winners and losers in the AI basket yet, but he can’t help but say that Nvidia is Jefferies’ favorite AI play. He said that Nvidia maintains control over the entire ecosystem, and is taking more pieces of the pie. He also pointed to demand for the company’s NVL72 liquid-cooled rack system, which contains 36 of its GB200 chips, as something that could help it take even more of the AI infrastructure market in 2025.

Finally, he gave NVDA stock a “Buy” rating, and raised his price target from $780 to $1,200, which is a massive upside of 12.7% from where NVDA stock is currently trading. It’s not just Wall Street analysts who are singing Nvidia’s praises. In fact, some investors are choosing to invest in NVDA stock rather than other assets like gold to hedge against inflation.

Nvidia Over Gold to Hedge Inflation

According to the latest Bloomberg Markets Live Pulse survey, 30.4% of the survey’s respondents think that NVDA stock could be a better bet than gold when it comes to hedging against inflation. This highlights the dominant role Nvidia is playing in the tech market, as well as financial markets, as it expands its influence over major parts of the economy. Also, Nvidia has been able to generate steady profits even amid high inflation, fueling a rally that suggests it will continue to deliver solid gains no matter what.

Moreover, Nvidia has surged over 600% since inflation first rose above 2% in March 2021, dramatically outpacing the S&P 500’s 30% gain. In contrast, gold is up a more modest 15% this year, and its upside has been limited compared to Nvidia’s meteoric rise. It’s important to note that Nvidia and other growth stocks remain sensitive to inflation and interest rates, but the company’s strong performance shows its ability to power through economic uncertainty.

Therefore, for investors concerned about persistent inflation and seeking assets that can hold up against rising prices, Nvidia presents a potentially more rewarding opportunity in today’s market environment.

Is Now the Time to Buy NVDA Stock?

Trent Masters, a portfolio manager at Alphinity Investment Management, suggests that the stock is still a good buy despite its significant rise. He points to the chipmaker’s strong market share and sustainable earnings as reasons for his bullish stance. He also mentioned that he personally missed the initial run in Nvidia and only bought the stock when it rose to $390 last May after its results. He said that this was probably one of the hardest things he has done in the last 10 years, as he bought a stock that was already up so much, feeling like he was making a mistake. But he said that investors just have to view these things objectively. If we keep waiting for a potential drop, especially with a stock like Nvidia, we might end up regretting not buying if the price goes up.

On the other hand, Adam Coons, a portfolio manager at Winthrop Investment Management, is advising caution. While Coons acknowledges Nvidia’s strong position in the AI chipmaking segment, he believes that current valuations in the market are inflated. Therefore, Coons is reducing his holdings and waiting for the stock’s valuation to normalize before considering further investments. He also added that for the long-term, Nvidia is definitely a company or a stock we want to own, but he just thinks that we need to be careful in the short-term around some higher volatility and some bigger swings.

The Bottom Line

Overall, for long-term investors, Nvidia remains an attractive investment, given its competitive strengths. However, in the short-term, the stock could see higher volatility and some correction based on the high valuations. Therefore, a balanced approach of buying some at current levels and waiting to buy more on dips may be sensible. 

However, the long-term growth story remains compelling, so long-term investors should think through the risks and continue building positions. Timing the market is tough, so dollar-cost averaging may help manage the pricing risk over time.


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