Nvidia Corp. has a number of key growth drivers that could help the company triple its data-center sales by 2025, according to an analyst.
The data-center business could become Nvidia’s
NVDA,
largest segment within a few years, wrote Bank of America’s Vivek Arya, as the company capitalizes on growing adoption of artificial-intelligence accelerators, builds momentum in data-processing units (DPUs), and captures “modest” share of the market for server central-processing units (CPUs).
The company is positioned to become a “one-stop-shop” for artificial-intelligence processing, continued Arya, who is increasingly upbeat about the company’s potential. He raised his price objective on Nvidia’s stock to $900 from $800, with the new target being the highest among those by Wall Street analysts.
With AI poised to become more prevalent and more complex, Arya expects that Nvidia’s AI accelerators will be of growing use. The accelerators are “specifically designed for the efficient processing of AI workloads like neural networks” and can help deliver “the near-instantaneous results that make AI applications valuable” without overwhelming the power grid,” he wrote.
The company has leading technology for these sorts of workloads and could see AI accelerators more than double their share of the server market by 2025, he continued.
Another opportunity lies with DPUs, which are programmable processors that can help servers run more securely and reliably. While adoption of DPUs is still perhaps only in the “low-to-mid single digits,” according to Arya, he forecasts a market opportunity of more than $10 billion over the next five years driven by compound annual growth of about 80%.
Arya also expects some traction for Nvidia in the server CPU market after the company announced earlier this year that it plans to eventually debut a data-center CPU, codenamed Grace, which leverages technology from Arm Holdings PLC, a company Nvidia is working to acquire.
“Grace is being designed to address specific workloads, particularly those that focus on high-performance computing and Giant AI, a niche portion of the ~$30 billion server CPU market,” Arya wrote, forecasting that Nvidia could capture a “modest but still meaningful 5% share” of that market. He called the server CPU announcement the latest attempt from Nvidia to drive vertical integration in its hardware stack.
Nvidia shares are up 2.3% in Friday trading, following a 4.8% rally in Thursday’s session after a Jefferies analyst boosted his price target to what was then a Street high. The stock has rallied 107% over the past 12 months as the S&P 500
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has risen 34%.