Positive comments from a KeyBanc Capital Markets analyst helped push Nvidia shares to what could be a record high close in the first trading day after the July Fourth holiday.
Nvidia shares (ticker: NVDA) were up 0.5%, at $823.42, in recent trading, and if the stock closes above the $819.48 it hit July 2, it will mark a record high. Amid a global chip shortage and surging demand for its graphics processors, Nvidia stock has rampaged this year, rising 58%, while the benchmark PHLX Semiconductor index rose 18%.
KeyBanc analyst John Vinh reiterated his Overweight rating in a note Tuesday, and raised his target price to $950 from $775. Wall Street is mostly bullish on Nvidia stock. Eighty-three percent of analysts have a Buy rating, and 12% rate the stock a Hold. The average target price is $740.40, which implies a downside of 11%.
To Vinh, his target price is justified because the company’s flagship videogame chips are selling well and will continue to outstrip supply for the remainder of the year.
Investors have expressed concern over Nvidia’s growing sales of graphics chips to Ethereum cryptocurrency miners — recalling when a crash in crypto prices roughly three years ago led too much chip inventory, which damaged the company’s revenue.
But Vinh brushed off concerns that the volatile cryptocurrency market will have substantial negative consequences for Nvidia.
Vinh wrote that Nvidia’s efforts to tweak its videogame chips’ mining abilities will effectively convince miners using graphics chips for Ethereum to buy the company’s crypto-specific chips. It launched the mining chips earlier this year, in an effort to ensure its core market of gamers could buy enough videogame cards.
The mining products are recorded in the company’s OEM & Other segment, which finance chief Colette Kress said included crypto chip revenue of $155 million in Nvidia’s fiscal first quarter. She expects crypto chip sales of about $400 million in the second quarter. But Nvidia’s videogame revenue includes purchases from miners, and Kress has said there is no accurate way for Nvidia to disclose that amount.
Separately, the Semiconductor Industry Association (SIA) on Tuesday said global chip sales rose 26% to $43.6 billion in May, compared with a year ago. Chip stocks were mixed Tuesday, and the Sox pulled back 0.2%.
“The industry shipped more units on a three-month moving basis in May than during any previous month in the market’s history, indicating semiconductor production has ramped up significantly to address rising demand,” SIA President John Neuffer said.
By max.cherney@barrons.com