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Nvidia Rising: Dazzles Street At the Supercomputer Show

For example, KeyBanc’s Michael McConnell reports back that Nvidia sees the data center market alone at $30 billion, high-performance computing market now worth $4 billion, and "deep learning training” alone worth $11 billion. "For deep learning inference, NVIDIA estimates a $15 billion TAM,” or total addressable market, he notes, "with sales into this vertical expected to ramp meaningfully over the next five years."

McConnell maintains a Sector Weight on the stock because of valuation concerns, he writes.

Craig Ellis with B. Riley reiterates a Buy rating, and a $270 price target, writing that his discussions with CEO Jensen Huang and CFO Colette Kress left him "incrementally more confident in continued strong Data Center growth inside an addressable market 15 times the current $2 billion sales run-rate."

There seems to be a “tipping point” at hand for Nvidia’s high-performance market, notes Ellis, with Nvidia’s GPUs now powering 88 of the “Top 500” world supercomputers, a record number for the company.

Ellis is clearly impressed with multiple technical aspects at the show, for example, Huang’s contention that "perhaps 70% of all workloads are AI-applicable, and thus are a compelling target for C17's Volta release and that of future product iterations."

He sees tantalizing glimpses of things to come in here:

More subtly, we gained enhanced roadmap and new product execution confidence. While there was no formal guidance, discussion included annual AI architecture enhancements which could foreshadow a 2018 Volta follow-on, indications the recently-announced Pegasus system could eventually shrink to a single-chip solution, and suggestions recent feature enhancements like tensor cores are readily replicable. Systems capabilities such as NVLink continue to go under- appreciated in our view, with the interconnect saving Infiniband networking cost and enabling speed-optimized 2-8 GPU performance in DGX and HGX systems. These integrated systems with embedded frameworks and protocol stacks are replicated by hyper-scale, HPC, government (i.e. Summit and Sierra supercomputer systems) and select enterprise systems to a degree we've not previously seen at NVDA. In our view, that foreshadows rapid and broad-based training, inferencing and HPC penetration which could potentially sustain the segment's +100% y/y growth rate for years to come. In summary, we retain a positive outlook on NVDA fundamentals and shares, and reiterate a Buy rating and $270.00 price target.


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