Cowen Models 30% Upside In Nvidia

Cowen started coverage of Nvidia (NASDAQ: NVDA) with a bullish note, saying the company's auto computing business is about to reach a positive turning point.

The Analyst

Analyst Matthew Ramsay initiated coverage of Nvidia with an Outperform rating and $325 price target. Ramsey also initiated coverage of four other semiconductor stocks with Outperform ratings: Advanced Micro Devices Inc (NYSE: AMD), Ambarella Inc (NASDAQ: AMBA), Monolithic Power Systems Inc (NASDAQ: MPWR), and Broadcom (NASDAQ: AVGO).

The Thesis

Although investors primarily focus on Nvidia's data center, gaming and crypto businesses, the company's auto computing division is about to start delivering "high margin growth," Ramsay said in a Thursday note.

Nvidia has an unparalleled "breadth of solutions and partnerships" when it comes to providing chips for "end-to-end autonomous driving solutions," the analyst said.

Among the unique attributes Nvidia provides in the autonomous driving space are its processing system, which works well with AI, and its unmatched autonomous driving simulation product, Ramsay said. The company has created an "ecosystem" of top partnerships in the autonomous driving space, he said. 

By 2022, Cowen projects that robotaxis could generate more than $2 billion of new revenue for Nvidia, representing a tripling of the analyst's above-consensus 2020 estimate.

Nvidia's data center business can grow rapidly and potentially exceed Cowen's above-consensus 2020 revenue estimate of about $6 billion, Ramsay said. And the company's gaming business has plenty of room to grow, since only about 32 percent of its customers have its most advanced chip, the analyst said. 

Price Action

Nvidia shares were up 1 percent at the time of publication Friday at $250.18. 

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