Investment firm Morgan Stanley held a meeting with Nvidia’s (NASDAQ:NVDA) management and there were several takeaways, including that the tech giant is gaining share in cloud spending.
“Investor focus is primarily on the demand picture, where management enthusiasm on both near-term and long-term outlook continues to strengthen,” analysts at the firm, led by Joseph Moore, wrote in a note to clients. “The commentary here was that most of the demand growth we have seen so far has been mostly higher revenue capture within a strong cloud capex growth trajectory, mostly capturing the migration from CPU to GPU within existing application workloads. That will continue to grow, but the broadly transformative AI use cases are not even really here yet.”
Moore has an Overweight rating and $210 price target on Nvidia.
In addition, Moore noted that many new artificial intelligence applications are just getting started, including in areas like healthcare, legal services and industrial automation seen as “the next big waves.”
“Over time, robotics is expected to extend this automation into physical domains, with new model categories emerging to serve each vertical,” the analysts added. “This is all driving its view that the AI infrastructure markets will be $3-5 trillion in CY2030, a higher number than we are baking in but consistent with the view that AI will have these transformative effects on global markets.”
Moore also said the issue of vendor financing — which has become of great concern in recent days, given the recent deal with OpenAI (OPENAI) — is more about being an accelerant than creating demand.
“Nvidia’s investment approach is to find leverage points where it can accelerate innovation,” Moore explained. “As an example, CoreWeave and sovereign investments in the UK and London were designed to speed up [data center] capacity expansions and innovation, and as those methods can be extended to other companies in the space.”
Lastly, Nvidia’s management did not seem overly concerned about AMD’s (AMD) further push (especially with its deal with OpenAI), as cloud service providers are dependent upon Nvidia to build capacity for its GPUs.
“Many competitors can build chips that do one thing very well, but Nvidia’s full-stack approach and the flexibility of the GPU give it a durable lead,” Moore added.