NVDA stock is currently trading at around $877 per share , trending upwards after dropping 10% from its 2024 high of $950 that it reached in March. Following the stock’s recent rally, the investment banking giant, Morgan Stanley (NYSE: MS), has doubled down on Nvidia stock, attributing this move to the expected growth in the adoption and utilization of AI. Here’s why Nvidia is one of Morgan Stanley’s favorite AI stocks, despite some recent fears surrounding Nvidia, which are particularly based on the performance of one of its partners.
Banking Giant Doubles Down on NVDA Stock
April has been an exciting month for tech investors, with many big tech names, including some of the Magnificent Seven, reporting stellar earnings. Thanks to this, NVDA stock saw a strong boost since this company provides the chips necessary for every other big tech name to develop their AI technologies.
Therefore, it’s only natural that Morgan Stanley is now doubling down on NVDA stock after the recent dip. The prominent financial institution just increased its bet on Nvidia, seizing on the opportunity to acquire more of the AI leader’s shares. Notably, Morgan Stanley currently maintains an “overweight” rating and a $1,000 price target on Nvidia stock, which is a 14% upside from where the stock is currently trading at.
Nvidia and SMCI
Wall Street is highly bullish on NVDA stock, with many analysts giving it a buy rating. Only a few stocks can boast such positive sentiment, but Nvidia has demonstrated the type of growth that’s hard not to marvel at. Additionally, Nvidia’s growth often rubs off on its partners. For instance, there’s Super Micro Computer Inc. (NASDAQ: SMCI), Nvidia’s long-standing partner. Nvidia and Super Micro Computer are tightly linked. In fact, the company’s CEO, Charles Liang, noted that as long as demand for Nvidia chips remains strong, Super Micro will continue to be a high-flying company.
However, Nvidia investors know that while the company’s partnership with Super Micro is very beneficial, since many of its offerings depend on Nvidia’s chips, it also comes with a few downsides. For instance, very few companies regularly pre-announce upbeat results before their official earnings report date, but Super Micro did that in January and this move proved to be successful, sending the company’s stock up by around 11%.
However, this time around, Super Micro failed to deliver another upside surprise, and this sent the stock price down almost 23%. According to Mizuho analyst Jordan Klein, expectations were that Super Micro would positively pre-announce results like they did in January, especially since the company’s shares had increased almost 150% in 2024, leaving zero room for error. He also added that Super Micro’s failure to pre-announce its results raises questions about the overall strength of the second quarter. On top of that, it has started a waiting game where investors have to wait until the company gives a report, which will consequently be used to guide the next quarter.
This negative sentiment on Super Micro has affected Nvidia, as their shares recently fell 10% after Super Micro broke from its recent pattern of providing preliminary results. This event marked the worst day for Nvidia since March of 2020 when the pandemic was soaring, and Nvidia’s market cap ended up going down from around $2.3 trillion to $1.9 trillion, even though it recently recovered and went back to the $2 trillion mark.
Nvidia’s partnerships are something investors should pay attention to before making any investment decision, as great earnings from partners could boost NVDA stock, while bad earnings could cause it to fall. However, this could be a potential buying opportunity for investors. It’s very likely that Nvidia will continue leading the AI chips sector in the future, so NVDA stock investors shouldn’t be too worried about competition. In fact, Bloomberg Technology recently reported that Nvidia’s AI accelerators are expected to generate almost $50 billion in revenue for this year, while competitors like AMD (NASDAQ: AMD) and Intel (NASDAQ: INTC) will only receive a minimal portion, coming in at $3.5 billion and $500 million, respectively.
Nvidia’s Run:ai Acquisition
Nvidia is a company that seeks growth from multiple different sources, including acquisitions and partnerships, which allow it to stay steps ahead of the competition when it comes to new technologies. Recently, Nvidia announced that it is acquiring Run:ai, a company that built a Kubernetes-based GPU orchestrator and while the price is not disclosed, there are reports that it is valued anywhere between $700 million and $1 billion.
Run:ai’s advanced orchestration tools are essential for managing GPU resources more efficiently. This capability is critical as the demand for AI and machine learning solutions continues to rise, requiring more sophisticated management of hardware resources to ensure optimal performance and utilization. By acquiring Run:ai, Nvidia can integrate this technology into its existing suite of AI and machine learning products.
This enhances Nvidia’s overall product offerings, allowing for better service to customers who rely on Nvidia’s ecosystem for their AI infrastructure needs. To sum up, this acquisition strategically positions Nvidia to strengthen its leadership in the AI and machine learning sectors, especially in the context of optimizing GPU utilization for these technologies.
NVDA Stock Forecast
Nvidia is big in AI, which is a red-hot field these days, and will likely continue to be. AI is used in everything that many people consider the future, from self-driving cars to facial recognition software, and Nvidia’s GPUs are well-suited for the heavy work that AI requires. This focus on AI could be a key factor in Nvidia’s comeback story, and as companies continue to invest in AI, demand for Nvidia’s products will rise. Additionally, future earnings reports will be big indicators of how things are going.
If Nvidia can show strong growth in its AI chips business, which won’t be hard, considering that the company is releasing its new Blackwell chips later this year, then NVDA stock will very likely see a massive boost soon. But another thing investors should consider before making any investment decision regarding NVDA stock is the broader market. Tech stocks in general have been a bit shaky lately, thanks to various macro like the Federal Reserve delaying the interest rate cuts, so Nvidia’s recent struggles aren’t exactly unique. However, if the market starts to turn around, that could also lift Nvidia’s fortunes.
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