Nvidia’s $1 trillion ambition draws cheers as software gets a bigger slice of the pie

The pursuit of Nvidia Corp. A $1 trillion opportunity drew praise from analysts following the company’s Investor Day presentation, though the chipmaker’s stock conveyed a more muted reaction.

Nvidia NVDA,
-0.54%
sees great opportunity in data center offerings, automotive applications and gaming and estimates that the combined total addressable market for these areas is $1 trillion, higher than previously anticipated.

Also Read: Nvidia CEO Lays Out Plans After Arm Deal Failed, Reveals New Hopper GPU

Nvidia estimates the total addressable market at $100 billion for gaming, $300 billion for chips and systems, $150 billion for artificial intelligence enterprise software, $150 million for Ominverse enterprise software, and $300 billion for the automotive industry.

“These are very large numbers and investors will clearly want to peel the onion before betting on such growth,” wrote Evercore ISI’s CJ Muse. Still, he pointed to the company’s “historical advantage” and $29 billion in R&D spending over the past 20+ years, factors that give him and his team “strong belief in the company’s hardware and software strategies , which should deliver world-class organic growth for years to come.”

Muse has an Outperform rating and a target price of $375 on Nvidia stock, which is down 0.8% on Wednesday after falling 0.8% on Tuesday on the day of the company’s presentation.

What most caught the eye of many analysts were new details about Nvidia’s software opportunities, several of which acknowledged could account for half of the company’s revenue over time.

“Currently, NVDA, which is running at maybe a few hundred million dollars today (a bit of Enterprise and Omniverse, some DGX support, and a bit of auto stuff), sees its entire future TAM being significantly software-driven ($150 billion, Omniverse, 150 Dollar B AI Enterprise and a significant portion of the $300 billion car
TAM),” wrote Bernstein’s Stacy Rasgon.

In his view, Nvidia offered a “clearer picture of the broader strategy” and showed how the different parts of its business could work together to allow Nvidia to achieve its “Omniverse” ambitions.

“We’ve joked at times that (despite being Gen-X) we feel a little too ‘boomer’ to worry about what Omniverse/Metaverse means here, but we think we’re starting to get a glimpse of it what could be possible we go down this path,” he wrote, while repeating an outperformance rating and $350 price target on the shares.

Chief Executive Jensen Huang described Nvidia’s Omniverse offering as “integral to robotic systems, the next wave of AI” when speaking at the company’s presentation on Tuesday.

Rosenblatt Securities analyst Hans Mosesmann was also enthusiastic about the roadmap for Nvidia’s software business.

“The level of software optimization and touchpoints that the company has established for over a decade is simply unmatched by any technology company (inside and/or outside of the semiconductor world), in our view,” he wrote, maintaining a buy rating and price target of $400 for Nvidia stock.

Raymond James analyst Chris Caso emphasized that Nvidia sees the total addressable market for software as three times larger than for games. This is “remarkable given that gaming currently accounts for 45% of revenue,” he wrote.

Caso has a strong Buy rating on Nvidia stock, which has doubled over the past 12 months as the S&P 500 SPX,
-0.66%
has increased by 15%.

https://www.marketwatch.com/story/nvidias-1-trillion-ambitions-draw-cheers-as-software-becomes-a-bigger-piece-of-the-pie-11648054478?rss=1&siteid=rss Nvidia’s $1 trillion ambition draws cheers as software gets a bigger slice of the pie

Brian Lowry

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