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Nvidia Analysts See Investor Day as Potential Turning Point

Nvidia Analysts See Investor Day as Potential Turning Point

(Bloomberg) -- Nvidia Corp.’s investor day this week could change the cautious narrative surrounding the semiconductor company, according to analysts who argued that the event could prove to be a positive catalyst for the stock.

Tuesday’s event comes about a week after Nvidia announced it would buy Mellanox Technologies for $6.9 billion. Analysts are looking for more details about the deal, including its strategic rationale and the impact it will have on Nvidia’s finances and growth outlook. An additional key focus will be any insight into what demand and inventory levels look like following a year the company described as “turbulent.”

Nvidia Analysts See Investor Day as Potential Turning Point

The investor day is scheduled to begin at 11:30 a.m. Nvidia is also presenting at the GPU Technology Conference Monday after the close. The shares fell 0.4 percent at 1 p.m. in New York, reversing an earlier advance. While the stock has risen about 30 percent from a December low, it remains more than 40 percent below an October record.

Here’s what analysts are expecting out of the meeting:

Citi, Atif Malik

The meeting “will help improve the growth narrative,” following the recent months of share-price weakness.

The firm is looking for more detail on the Mellanox acquisition, as well as about the pace of long-term growth for data-center products.

Malik asked whether “Nvidia grew too much too fast,” and what a normalized growth trajectory will look like given increasing competition.

Rosenblatt Securities, Hans Mosesmann

The event “should start the process for investors to move beyond the year of pain inflicted by crypto related GPU inventories,” a reference to graphics processing units.

Expects insight on the Mellanox deal “that should help the Street understand the reasoning behind the unusual move by Nvidia.” Adds that investors will also be looking for updates on 7 nanometer gaming chips and compute GPUs given an “aggressive” posture by Advanced Micron Devices.

Bernstein, Stacy Rasgon

Wants to hear about the strategic rationale for the Mellanox deal, “as well as what they might plan to do with the asset that could not have been accomplished by partnering.” Writes that detail about potential revenue synergies “would be helpful.”

Also wants more detail on an outlook for the second half of the year that it described as lofty, “to put it mildly.”

The outlook would require “a rapid return to strong sequential datacenter growth, and gaming revenues to exit the year somewhere close to $2B, well above prior peaks,” Bernstein wrote. “How much visibility does NVDA have into the 2H (we suspect very little given recent events)? What gives them confidence that they can achieve what they have set the Street to?”

Morgan Stanley, Joseph Moore

“We would love to see a 5 year forecast that is easier to tie to a revenue and earnings model.” Nvidia has earned “substantial investor confidence” in the semiconductor sector, “and a longer term revenue forecast with clear milestones would be very helpful when looking through this soft patch in cloud spending.”

Is also looking for discussion of Nvidia’s deep learning and training products, cloud gaming, auto-related chips, and “a strong case for GPU acceleration in other markets, including continued ramp in high performance compute and new areas such as traditional machine learnings.”

Goldman Sachs, Toshiya Hari

The event is “unlikely to move the needle on the stock, at least in the immediate term,” given recent gains in the share price, and because “investors remain focused on near-term execution/results as they try to gauge to what extent the recent correction in fundamentals was due to cyclical or structural issues.”

Continues to have a positive long-term view on the company, given its exposure to growing products categories like gaming, data center and autonomous vehicles.

To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm

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