NVIDIA stock surged more than 3% during regular trading hours on Monday as analysts assessed the company’s Deep Learning Connect event, which was held last week. One analyst said on Friday that the better-than-expected sales of the Nintendo Switch will boost NVIDIA’s results, while another said on Monday that last week’s event gave them a fuller understanding of the chip maker’s machine learning and customer engagement efforts.
NVIDIA stock breaks out after Mobileye – Intel deal
NVIDIA stock has had a volatile 2017 so far despite being up 222% for the last 12 months, but since Intel’s acquisition of autonomous driving firm Mobileye was announced last week, NVIDIA shares have been climbing. NVIDIA stock has rallied by about 9%, snapping a pair of downward trends.
The chip maker’s deal with Tesla to use its chips in future Autopilot systems has made it a solid player in the autonomous driving space, so investors may be considering the likelihood of NVIDIA becoming an acquisition target next. Some analysts suggested after the Mobileye deal that almost any autonomous driving player could become a target because of how many other autonomous driving firms have been acquired recently.
Investopedia‘s Michael Kramer describes the current trend around NVIDIA as “decidedly bullish” but also warns about “danger lurking in the water.” The stock climbed above its 50-day simple moving average, but the website adds that it looks to be following the same pattern it followed on Feb. 23, which was the day it fell from about $110 to a low around $98 per share. That’s also the same day that multiple analysts downgraded the name.
According to Kramer, until NVIDIA stock breaks over $110, it’s not in the clear. He adds that investors who missed the stock at the bottom might want to wait to see what happens next.
NVIDIA stock still a Conviction Buy: Goldman
NVIDIA stock is probably receiving a boost from a positive report from Goldman Sachs analyst Toshiya Hari. In a research note dated March 20, Hari reiterated his Conviction List Buy rating and $130 price target on the stock. He attended the chip maker’s Deep Learning Connect event in London last week and Bosch Connected World in Berlin where NVIDIA’s CEO gave a keynote on their efforts in the area of autonomous driving. Machine learning was also a focus of last week’s events.
He believes the chip maker’s off-the-shelf machine learning models and customer support efforts are especially important as it grows its sales and support capabilities and creates “sticky relationships” with customers outside the cloud. He notes that customers that aren’t in the cloud space are more likely to need customer support from the company.
Further, the chip maker continues to follow the strategy it used in Gaming where it has gained 15 points of market share over the last five years. The analyst believes that the company’s plan to boost spending in the high teens over the next several quarters is “reasonable,” and he expects it to produce similar results in the Data Center, Enterprise and Automotive segments.
NVIDIA boosted by Nintendo Switch
NVIDIA chips are also being used in the new Nintendo Switch, which has apparently been selling better than expected. Last week it was reported that Nintendo plans to double the number of Switch gaming devices it will produce, moving to 16 million.
RBC Capital Markets analyst Mitch Steves had been estimating only 8 million to 10 million units. He estimates that the other 6 million to 8 million units could add $300 million to $400 million to the chip maker’s top line. He feels that the Nintendo Switch de-risks NVIDIA stock in the near term because of the apparent success.
Shares of NVIDIA stock rose to as high as $109.32 during regular trading hours on Monday.