NVIDIA (NVDA) is up 2.7% trading at all-time highs after BofA/Merrill analysts raised their price target on the stock to a Street high $275/share based on higher estimates. The firm cited a number of reasons for the bullish call.
December NPD gaming data was strong, which bodes well for NVIDIA's core market. BAML also cited strong sales of Nintendo's (NTDOY) Switch gaming console and continued momentum in eSports, a field that is very young and has huge potential. The gaming vertical accounted for 59% of NVIDIA's sales in the third quarter, up 25% year-over-year.
What's more, BAML is optimistic about the high performance computing segment following a strong report from Taiwan Semiconductor (TSM) this week.
NVIDIA's graphic processing units (GPUs) are required for mining cryptocurrencies, where there is sort of a gold rush happening right now.
NVIDIA's stock continues to defy gravity while it seemingly has everything going for it. Investors are particularly excited about the opportunity in the data center, where hyperscalers are using GPUs for machine learning. Revenue from the data center was up 20% Q/Q and 109% Y/Y at $501 million last quarter.
For a hardware, chip manufacturer, it is easy to balk at the valuation -- roughly 45x EPS estimates. That said, NVIDIA dominates the GPU market that it invented and demand related to gaming, artificial intelligence and digital asset mining shows no signs of slowing anytime soon.