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Morgan Stanley upgrades Nvidia on chipmaker’s gaming, A.I. leadership

Key Points
  • Morgan Stanley raises its rating for Nvidia shares to overweight from equal-weight, predicting the company 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," the firm's analyst writes.
Nvidia co-founder and CEO Jensen Huang attends an event during the annual Computex computer exhibition in Taipei.
Tyrone Siu | Reuters

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.

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