Last week, Nvidia announced a deal to buy Mellanox for $125 per share, or a total enterprise value of about $6.9B
Commenting on the presentation made by Nvidia (NVDA) CEO Jensen Huang at this year's GPU Technology Conference, where he announced the expansion of its GPU development ecosystem, Stifel analyst Kevin Cassidy said he believes the company is taking "a page out of Intel's strategy" and that he came away "impressed" with the expanding range of GPUs with price, performance and power trade-offs to address markets from supercomputers to toy robots. Voicing a similar opinion, his peer at Wells Fargo raised his price target on Nvidia shares to $190, and added that he views Nvidia's acquisition of Mellanox (MLNX) as positive.
GPU ECOSYSTEM EXPANSION: Nvidia has announced several developments that it said "reinforce NVIDIA GeForce GPUs as the core platform that allows game developers to add real-time ray tracing effects to games." The announcements, which build on the central role Microsoft (MSFT) DirectX Ray Tracing plays in the PC gaming ecosystem, include integration of real-time ray tracing into Unreal Engine and Unity; adding ray tracing support to GeForce GTX GPUs; the introduction of Nvidia GameWorks RTX, a comprehensive set of tools and rendering techniques that help game developers add ray tracing to games; and new games and experiences that showcase real-time ray tracing such as Dragonhound, Quake II RTX and others. "When programmable shaders were introduced more than 15 years ago, they changed gaming forever. Today, real-time ray tracing is set to do the same thing - it represents the next landmark shift in game development," said Matt Wuebbling, head of GeForce marketing at Nvidia. "The breadth of industry adoption is remarkable -standard APIs, integration in major game engines, multiple AAA titles and support enabled in millions of hardware products. It all points to an exciting future for gamers." Investors in Epic Games, which makes the Unreal Engine, include Tencent (TCEHY), KKR (KKR), and Disney (DIS). The company also announced a collaboration with Amazon (AMZN) Web Services Internet of Things on Nvidia Jetson to enable customers to deploy Artificial Intelligence and deep learning to millions of connected devices. This joint solution enables models to be easily created, trained and optimized on AWS, then deployed to Jetson-powered edge devices using AWS IoT Greengrass. The Nvidia Jetson platform offers AI at the edge with high-performance and power-efficient computing. Applications include autonomous machines and smart cameras for industries such as retail, manufacturing, agriculture and more.
'A PAGE OUT OF INTEL'S STRATEGY': Noting that Nvidia's CEO, Jensen Huang, kicked off this year's GPU Technology Conference with announcements for expanding the GPU development ecosystem, Stifel's Cassidy told investors that he believes Nvidia is taking a page out of Intel's (INTC) strategy that made the x86 CPU the broadest used CPU architecture. Nvidia's common GPU architecture across multiple end markets gives leverage for third party software and tool developers, he contended, adding that he came away from the presentation "impressed" with the expanding range of GPUs with price/performance/power trade-offs to address markets from supercomputers to toy robots. Additionally, the analyst pointed out that he expects Nvidia and Mellanox to continue developing products that off-load workloads from the CPU to GPUs, networks and network processors. Cassidy reiterated a Hold rating and $150 price target on Nvidia’s shares. Meanwhile, Wells Fargo analyst Aaron Rakers raised his price target for Nvidia to $190 from $170 following the keynote presentation made by Jensen Huang at GTC. Given investor focus on Nvidia's $6.9B acquisition of Mellanox, the analyst thinks the company's datacenter-focused announcements are "the most notable focus." Rakers reiterated an Outperform rating on Nvidia's shares.
PRICE ACTION: In morning trading, shares of Nvidia have gained about 4% to $175.31.