Buy Nvidia as AI adoption is still in the early stages, Redburn Atlantic says

Nvidia ‘s still in early growth stages as artificial intelligence capabilities continue to progress, according to Redburn Atlantic. Analyst Timm Schulze-Melander initiated the stock with a buy rating and a price target of $178, which implies upside of 22.5%. Looking ahead, the analyst sees the AI powerhouse boasting 65% EBIT margin expansion and compound annual earnings growth of 38% between 2024 and 2030. “Such growth over a six-year period is aligned with prior adoption cycles. Our analysis finds that 18 years is the average duration of the ‘adoption phase’ growth for new technologies,” he said. NVDA YTD mountain Nvidia performance this year. “Nvidia has exploded into the public consciousness. However, given the stellar share price performance, questions have emerged regarding the durability of the AI market as well as the technological sustainability of Nvidia’s position and financial returns,” the analyst wrote in a note to clients. “We see two primary growth engines that the market underestimates.” The first growth driver is in accelerated computing, which aims to make AI data processing more efficient, Schulze-Melander said. The chipmaker has the largest installed base of graphic processing units, a dominant software interface and the largest installed base of application libraries — the latter which gives the company a strong competitive position with it products and customers, according to the analyst. The second factor behind Nvidia’s growth case is the market’s underestimation of demand for the company’s products and services — even as rivals try to curb the chipmaker’s dominance. “These customers are committed to Nvidia’s Compute Unified Device Architecture (CUDA) software and rely more heavily on Nvidia’s system-level solutions. The CUDA software moat, with integrated applications libraries and a 12-month innovation cycle, means that Nvidia’s rivals are unlikely to usurp its market dominance,” Schulze-Melander said. Nvidia has been on a tear, up 193.3% year to date. That makes it the third-best performing S & P 500 stock of 2024.