Morgan Stanley supports NVIDIA: Still the "top stock", Blackwell may deliver strong results in the fourth quarter

During the current technology correction in the US stock market, NVIDIA's stock price has fallen by over 16% in the past month. Despite this, the computing power giant has received support from the Wall Street major bank Morgan Stanley.

On Wednesday local time, Morgan Stanley analyst Joseph Moore and his team released a research report stating that they are optimistic about NVIDIA's long-term growth potential, and market concerns about it will diminish over time. Morgan Stanley has re-evaluated NVIDIA's stock as a "top pick" and maintained a "overweight" rating.

The Moore team believes that NVIDIA's data center business will continue to contribute to the majority of the company's growth in the next five years, especially in AI/ML (Artificial Intelligence/Machine Learning) hardware solutions. With the launch and delivery of the Blackwell super chip, NVIDIA is expected to further solidify its competitive position in the AI field.

Morgan Stanley believes that this round of selling may be a very good buying opportunity, setting NVIDIA's target stock price at $144.00, which is 38.8% higher than the closing price on Tuesday.

Morgan Stanley predicts that by 2027, NVIDIA's earnings per share will increase from $1.30 in 2024 to $3.70, and the P/E ratio will decrease from 51.0 times in 2024 to 29.7 times.

Strong Confidence in Blackwell

Morgan Stanley stated that Blackwell products have generated strong interest in the market, especially with significant improvements in their inference performance, which further drives customer enthusiasm.

NVIDIA has sent Blackwell samples this week, and Morgan Stanley pointed out that despite the complexity of the product and rack, which may pose some challenges, the supply chain is improving well, and the initial shipment volume of Blackwell in Q4 2024 may be substantial.

All signs indicate that Blackwell's production is growing at a strong pace in the second half of the year, including rack production.

We expect the initial shipment volume in Q4 to be substantial, but still believe that Hopper will account for most of the revenue in early 2025.

Morgan Stanley is optimistic that the availability of Blackwell will further strengthen NVIDIA's competitive position.

Blackwell is seen as one of the key drivers of NVIDIA's future growth, especially in AI/ML hardware solutions. It is expected that as demand shifts from Hopper to Blackwell, the company's visibility will increase.

Demand indications for Hopper remain strong. Production of Hopper continues to rise, with H100 transitioning to H200 (bringing better HBM3e memory bandwidth and higher memory capacity), and we hear confidence in the strong sales of these two products. Despite Morgan Stanley's optimistic outlook on NVIDIA's prospects, it also pointed out some potential risks, including the possibility of a weak global economy affecting capital expenditures, and the potential for intensified competition due to lower AI development costs. However, the institution believes that these risks will not impact NVIDIA's long-term growth trend