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Nvidia’s Blackwell chip will steal the show in 2025, easing lingering concerns, Morgan Stanley said.
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Strategists said other noises would dissipate by mid-2025 and the stock is poised for another 20% gain.
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The bank named Nvidia as its “top pick” for next year.
Nvidia’s Blackwell chip will be the company’s biggest story in 2025 – and the success of its next-generation GPU will overshadow any lingering concerns investors may have, Morgan Stanley said.
In a note this week, the bank reiterated its “overweight” rating on Nvidia stock and said the chipmaker remains its “top pick” for next year. The bank’s optimistic attitude is fueled by the expected success of Blackwell – Nivida’s next-generation chip that enables artificial intelligence.
The bank issued a price target of $166 per share, implying a 23% upside from Friday’s share price of around $134.82.
“We are generally most excited about NVIDIA when the near-term data points look mixed, but the underlying dynamics are very strong. We think we are approaching that point now,” the analysts wrote in a note. “There is transition pressure, but by 2.25 the only topic we think will be Blackwell’s strength.”
Investors are already optimistic about the Blackwell chips, which are expected to hit the market in early 2025. Nvidia shares rose earlier this year after CEO Jensen Huang said demand for the chip was “insane,” boosting Wall Street expectations for continued earnings growth.
The chip is likely to be a “revenue driver” in the second half of next year, which could mean “significant upside for the stock,” Morgan Stanley added.
The success of the new chip could also ease a handful of investor concerns about the stock in the short to medium term.
“We think there are a number of concerns here, some of which are exaggerated, some of which are causing fear in the short term, but some of which we believe are not relevant in the longer term,” the bank said, highlighting four issues facing investors are particularly concerned about.
Investors are concerned about the slowing builds of Hopper, Nvidia’s current generation of AI chips. On its last earnings call, the company forecast revenue growth of just 69.5% for the fourth quarter, its slowest revenue forecast in seven quarters.
But the delay in Hopper’s construction is a “non-issue,” Morgan Stanley said.
“The reason, of course, is that we only have a few more quarters until the end of Hopper’s lifespan. We don’t want to correlate the Hopper builds with the Hopper revenues, which will continue for about three more quarters, but there is already a large backlog of builds, so it’s time to delay the start,” analysts wrote.
