Morgan Stanley hikes Nvidia price target ahead of earnings: 'AI demand continues to surge'

Published Wed, Feb 7 202411:06 AM ESTUpdated Wed, Feb 7 202411:39 AM EST

The near-term growth story for Nvidia remains promising amid ongoing demand for artificial intelligence processors, according to Morgan Stanley. The Wall Street investment bank raised its price target to $750 from $603 and reiterated an overweight investment rating ahead of the dominant AI chipmaker's quarterly earnings release set for Feb. 21. The new price target suggests about 10% upside from Nvidia's current levels. The chipmaker has surged 211% in the past 12 months, including a 39% rally in the first six weeks of 2024. As Nvidia continues to climb, some investors have questioned whether earnings will expand enough to justify the rally, especially amid reports of order cuts late last year, and if the stock's march higher is sustainable. NVDA 1Y mountain Nvidia shares over the last 12 months "We continue to see a very strong near term picture, and think that various second derivative anxieties are missing the bigger picture," Morgan Stanley analyst Joseph Moore wrote in a Wednesday note. "AI demand continues to surge." Moore added that the stock began this year trading below 25 times trailing-price-to-earnings, "a level that the stock has only seen a handful of times in the last several years." "General concerns about over earning and reports of order cuts at key customers in November and December compressed the multiple," Moore said. "We don't expect that kind of setup again soon as expectations for upside in the quarter may quickly turn to sustainability concerns once the numbers are out — a pattern we have seen the last few earnings reports for NVDA." Nvidia remains in a strong position and is comfortable with the competitive dynamic in the chips market, according to Moore. The analyst is more cautious on his 2025 estimates, which he said was a "tougher call." "Longer term, cloud commentary is encouraging, but we do continue to budget for a plateau in 2025," Moore said. Next year could see some consolidation of large language model projects currently in development, he noted. — CNBC's Michael Bloom contributed to this report.