Morgan Stanley Reaffirms Nvidia as Top Pick for 2025 Amid AI Chip Market Dynamics

Morgan Stanley sticks by Nvidia during sell-off, reiterates as top pick

Morgan Stanley still sees more upside ahead for Nvidia , despite its recent losses. The investment bank reiterated that the artificial intelligence chip maker is a top pick heading into 2025, reaffirming an overweight imvestment rating. The firm's $166 price target implies about 27% upside from the stock's Thursday close. "We have tended to be most enthusiastic on Nvidia when the near-term data points appear mixed, but underlying dynamics are very strong," analyst Joseph Moore wrote to clients on Friday. "We think we are approaching that point now ... there are a number of concerns here, some of which are overstated, some of which are anxiety inducing short term, but we believe irrelevant longer term." Moore's call comes as the stock snapped a five-day decline on Thursday. During that stretch, Nvidia fell into a correction , usually defined as a retreat of 10% or more from a recent high or a record close. Even with the Thursday gain, Nvidia was still more than 12% below its all-time high close. The week-to-date loss was a bit more than 2% while the year-to-date gain approaches 164%. NVDA 5D mountain NVDA, 5-day Nvidia has recently been buffeted by a number of investor anxieties. Moore pointed to a continued deceleration in builds of the company's Hopper chips, which he believes is a "non issue" given that there hasn't been a "notable shift" in that slowdown. The analyst also cited progress by Marvell Technology and Broadcom in application-specific integrated circuit (ASIC), but the capabilities of Nvidia's Blackwell chips "raise the bar materially," Moore said. Although Moore noted worries surrounding shipments of Blackwell chip variants, he still anticipates that all of those chips will get sold. Looking into 2025, he anticipates that the next couple of quarters may be "transitional," seeing similar revenue upside as the last two quarters until Blackwell bumps numbers higher in the second half of next year. "[B]y mid year we remain comfortable that the focus will remain on Blackwell which will be the driving force behind revenue in 2H, potentially unlocking more significant upside," Moore concluded. Like Moore, much of Wall Street is bullish on Nvidia. Of the 64 analysts covering the stock, a total of 58 have a strong buy or buy rating. Only six are neutral on Jensen Huang's company, which currently boasts a market value of $3.2 trillion. Analysts' average 12-month price target of $170 reflects more than 30% upside from current levels.

Morgan Stanley on what you should do with Nvidia stock in 2025 By Investing.com

While there are some near-term concerns over NVDA, such as a slowdown in Hopper builds and the staggered readiness of Blackwell product variants, Morgan Stanley's team views these issues as transitional. By the second half of 2025, the strength of Blackwell will be "the only topic," analysts led by Joseph Moore said in a note. On competition, Morgan Stanley addresses fears about ASIC encroachment, particularly from Marvell (NASDAQ:MRVL) and Broadcom (NASDAQ:AVGO). Yet, the bank believes the biggest ASIC users will witness purchasing shift back toward GPUs. "While our forecasts for both AVGO/MRVL ASIC revenue are largely conservative, as are our forecasts for GPU, we believe that GPU will meaningfully outperform ASIC this year," analysts said. The report also emphasizes Nvidia's extensive R&D investments, which recently surpassed $12 billion annually, as critical to sustaining its leadership in AI hardware and system-level innovations. Market watchers are also concerned about scaling Artificial General Intelligence (AGI) clusters, with technologists pushing for larger sizes while financial backers question the return on investment (ROI). While consolidation in this space by 2026 is possible, Nvidia's innovations, like Mellanox (NASDAQ:MLNX) and NV-Link, enhance efficiency and address these challenges, according to analysts. The company's growth drivers -- such as inference, sovereign AI training, and enterprise applications -- comprise 70% of its data center revenue. "Even with some consolidation in the arms race, we should still see enduring growth potential," analysts said. Looking ahead, the Consumer Electronics Show (CES) in January 2025 is expected to be a positive event for Nvidia, with the company's CEO Jensen Huang set to present a keynote for the first time in several years. "The messaging should be the same - Blackwell demand is exceptional, but supply constrained," analysts remarked. "But by mid year we remain comfortable that the focus will remain on Blackwell which will be the driving force behind revenue in 2h, potentially unlocking more significant upside."