Morgan Stanley's Optimism for Nvidia in 2025

Investing.com — Morgan Stanley (NYSE:MS) continues to see Nvidia (NASDAQ:NVDA) stock as a top pick for 2025, reiterating an Overweight rating with a price target of $166.

Near-Term Concerns

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.

Future Focus

By the second half of 2025, the strength of Blackwell will be “the only topic,” analysts led by Joseph Moore mentioned in a note.

Competition Analysis

On the competition front, Morgan Stanley addresses fears about ASIC encroachment, particularly from Marvell (NASDAQ:MRVL) and Broadcom (NASDAQ:AVGO). However, the bank believes the biggest ASIC users will shift back towards GPUs.

> “While our forecasts for both AVGO/MRVL ASIC revenue are largely conservative, we believe that GPU will meaningfully outperform ASIC this year,” analysts stated.

R&D Investments

The report highlights Nvidia’s extensive R&D investments, recently exceeding $12 billion annually, as essential for maintaining its leadership in AI hardware and system-level innovations.

AGI Clusters and Challenges

Market watchers are also wary about scaling Artificial General Intelligence (AGI) clusters. While technologists are advocating for larger sizes, financial backers are concerned about the return on investment (ROI).

Consolidation in this space by 2026 is feasible; however, Nvidia's innovations, including Mellanox (NASDAQ:MLNX) and NV-Link, enhance efficiency to tackle these challenges, according to analysts.

Growth Drivers

The company’s growth drivers—comprising inference, sovereign AI training, and enterprise applications—account for 70% of its data center revenue.

> “Even with some consolidation in the arms race, we should still see enduring growth potential,” analysts stated.

Future Events

Looking ahead, the Consumer Electronics Show (CES) in January 2025 is anticipated to be a positive event for Nvidia, with CEO Jensen Huang set to deliver a keynote for the first time in several years.

> "The messaging should be the same – Blackwell demand is exceptional, but supply constrained," analysts remarked.

> “By mid-year we remain comfortable that the focus will remain on Blackwell which will be the driving force behind revenue in the second half, potentially unlocking more significant upside.”