Nvidia's dominant positions in the artificial intelligence and gaming markets are unmatched, according to Morgan Stanley.
The bank raised its rating for Nvidia's shares to overweight from equal-weight, predicting the chipmaker will report profits above expectations in its fiscal 2019.
"In addition to longer-term data investment trends, we see shorter-term drivers in gaming offsetting crypto weakness, and progress in data center inference [machine learning] expanding the long-term opportunity," analyst Joseph Moore wrote in a note to clients.
Moore reiterated his $258 price target for Nvidia shares, representing 20 percent upside from Monday's close.
The analyst estimates Nvidia will generate fiscal 2019 earnings per share of $6.76 versus the Wall Street consensus of $6.27.
Nvidia shares are up 120 percent over the past 12 months through Monday compared with the S&P 500's 11 percent gain.
"We now believe that developments in hardware and software have positioned NVIDIA to capture a higher portion of Inference, key to the long term growth rate," he wrote. "Strength in gaming titles, and a new NVIDIA product cycle, should drive growth while minimizing the negative impact of cryptocurrency mining economics moving to zero."
The company's stock closed up 5.8 percent Tuesday, ending at $227.91.
— CNBC's Michael Bloom contributed to this story.