Morgan Stanley Upgrades Nvidia As The Data Era Is Now 'Investable'

The future of technology requires more advanced semiconductor technologies, faster networks and cloud-based data centers, according to Morgan Stanley. At the front of it all is NVIDIA Corporation NVDA.

The Analyst

Morgan Stanley's Joseph Moore upgraded Nvidia's stock from Equal-weight to Overweight with an unchanged $258 price target.

The Thesis

The future of technology will consist of:

• Internet of Things (IoT) connected devices which collects data from end points;
• Artificial intelligence platforms being sifting through stored data;
• Virtual and augmented reality technologies allows insights to be viewed in a worker's natural environment; and
• Automation supplementing human work.

These technologies already exist and are being used by individuals and companies today, but through 2030 the pace of computing growth cycle among these four areas will increase 10-fold, Moore said. Any object, transaction, or environment that's worth measuring and analyzing will be done as advanced semiconductor technologies makes it easier and faster to complete tasks.

Where Nvidia Fits In

Moore said "all roads basically lead back to Nvidia," especially as it begins to build a business based on machine learning Inference aided by recent advances in its software. Specifically, Inference is the real-time usage of real-time usage of neural network databases that are created by computationally intensive algorithms.

From a historical point of view, Inference tasks were almost exclusively made possible on Intel Corporation INTC microprocessors but as the tasks expand in complexity it will require artificial intelligence "accelerators." Moore said this will prove to be a "very important" market for Nvidia, which has already "moved extremely rapidly" in addressing the opportunity in hardware and in software.

Nvidia's Inference business will use a broader set of semiconductor solutions due to the diverse nature of workloads, according to Moore. The company's Tensor RT4 "considerably expands the score" of potential solutions with support in speech recognition, recommendation engines, and other cloud based Inference tasks.

"From visiting Nvidia's developer's conference last week, and last year in Europe, it is becoming clear that these developments matter to customers who are developing Nvidia inference solutions both at the edge with products such as Jetson,and in the cloud, where they are citing very robust benchmarks," Moore said in the note. "[I]t has become clear that Nvidia is moving the ball forward very quickly."

Price Action

Shares of Nvidia were trading higher by 3.7 percent at $223.35 early Tuesday morning.

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