Nvidia shares were up Monday morning as regulators focus on the chipmaker because of its dominance in artificial intelligence.
Nvidia shares rose 3.7% to $130.42 in morning trading. The stock closed down 1.9% on Friday.
The stock has been in a trough ahead of the company’s earnings release, scheduled for August. Last week, analysts at New Street Research downgraded Nvidia in a rare move, saying the company’s valuation meant it would be difficult for shares to advance further.
That call received some immediate resistance when UBS analyst Timothy Arcuri raised his price target on the stock to $150 from $120 and reiterated a buy rating on the stock in a research note Monday.
The new target price is based on a price-to-earnings multiple of 28 times the average of Arcuri’s forecasts for Nvidia’s earnings in 2025 and 2026.
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Arcuri expects Nvidia to generate revenue of $204 billion and earnings of $4.95 per share in 2025. The consensus is for revenue of about $157 billion and earnings of $3.57 per share, according to FactSet.
The UBS analyst pointed to large-scale orders for liquid-cooled rack systems that will house many of Nvidia’s upcoming Blackwell chips. Arcuri estimates that about 69,000 of these systems will ship in 2025, noting that each shipment of 5,000 of these systems adds about $9 billion in revenue and 20 cents in earnings per share.
“Sentiment on the stock, while still strong, has faded somewhat in recent weeks…creating more of a wall of worry that should ultimately be healthy if our outlook materializes,” Arcuri wrote.
Besides profits, another concern for Nvidia is increasing scrutiny from regulators, with both the U.S. and French authorities signaling in recent months that they are investigating the company.
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The latest regulator to weigh in on Nvidia was Margrethe Vestager, the European Union’s competition commissioner. She said there was a “huge bottleneck” in Nvidia’s chip supply and that regulators had asked the company questions but no regulatory action was being taken, according to Bloomberg.
Nvidia generally has a good case, as its success is based on delivering a superior product rather than stifling competition in a market where AI chips are competing. However, the industry’s reliance on Nvidia’s CUDA software and the company’s efforts to further integrate areas such as network infrastructure appear to be causing some concern among competition authorities.
Among other chipmakers, Advanced Micro Devices shares rose 2.7% and Intel shares rose 4.3% in early trading. Server maker Super Micro Computer shares rose 6%.
Shares of Nvidia are up 154% year-to-date through Friday’s close. That compares with a 17% gain
S&P 500
index and a 22% increase in the
Nasdaq Composite Index
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during the same period.
Write to Adam Clark at adam.clark@barrons.com
