Morgan Stanley: NVIDIA (NVDA.US) NDR Highlights Diversified Growth Opportunities
Summaries are public. PDF access requires an active membership; all members have the same access. Sign in
Key Views
Demand drivers span three segments: AI labs (~20% of demand), traditional hyperscalers (~50% of revenue), and AI cloud, industrial, and enterprise (~50% of data center revenue). AI lab exposure at one frontier model provider has risen from minimal to nearly 50%, while others remain primarily on NVIDIA. Hyperscaler growth is constrained by land and power, yet networking and CPU present serviceable addressable market expansion. NVIDIA targets $20 billion in CPU revenue this year, with Vera chips designed for single-threaded workloads. Custom ASICs persist, but NVIDIA retains a significant share as the lowest cost per token often comes from its silicon.
Outlook
The Vera Rubin cycle remains robust over the next 12 months, with Rubin Ultra shipping in 2027. Memory shortages will persist for years, managed by optimizing the compute, networking, and memory mix. An expanding value investor base and over 50% of cash flow earmarked for capital returns could narrow the valuation discount.
Recommended Securities
NVIDIA (NVDA.US): Overweight, target price $288, based on approximately 22× 2027 ModelWare EPS of $13.08. Top semiconductor pick.