Nvidia stock pops on HSBC upgrade: ‘We’re shocked by Nvidia’s pricing power on AI’

Nvidia’s (NVDA) stock popped on Tuesday after analysts at HSBC turned bullish on the chip maker, citing its position as an artificial intelligence leader.

HSBC raised its rating on the stock to Buy from Reduce while raising its price target on the stock to $355 from $175 per share. The firm’s new price target reflects roughly 30% upside from where shares were trading on Tuesday.

HSBC Head of Technology Frank Lee wrote in a note that he had concerns over Nvidia’s declining data center revenue through the last two quarters as well as its rising inventories. But he believes the pricing of A.I. chips counteracts those headwinds and changes the revenue model for Nvidia.

“In particular, we’re shocked by Nvidia’s pricing power on AI chips that we see driving earnings upside, higher valuation,” Lee wrote.

HSBC analysis shows A.I. chips will be sold at a price 10 to 20 times higher than standard gaming chips, meaning Nvidia won’t need to increase sale volume at levels previously…

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This article was written by and originally published on finance.yahoo.com