Morgan Stanley: Nvidia stands out as a unique investment case

Investing.com -- Morgan Stanley reiterated its Overweight rating on Nvidia (NASDAQ: NVDA), calling it a "unique opportunity" in the semiconductor space and maintaining it as the firm’s top pick despite broader concerns about sector headwinds.

“This still seems like a unique opportunity to us,” Morgan Stanley analysts wrote in a note. “The largest market cap semiconductor company in the world is making a strong case that business will accelerate from here, while there is still significant anxiety—almost consensus—that conditions will decelerate.”

Nvidia’s most recent results impressed across multiple fronts. “Gross margins ahead, revenues ex-China strong, networking recovering, positive commentary on the supply chain ramp on racks,” the analysts stated.

While there was limited forward guidance on the second half of 2024 or calendar year 2026, Morgan Stanley attributed that restraint to geopolitical sensitivity around China.

“Our view continues to be that we are materially undershipping demand,” the analysts wrote.

A key short-term concern, namely that rack bottlenecks are leading to rising inventory among original design manufacturers (ODMs), is expected to resolve soon.

“That rack bottlenecks are causing inventory to build up at the ODMs… will soon be replaced by tight supply of those Bianca cards as rack bottlenecks are cleared and demand strengthens.”

Morgan Stanley’s continued conviction in Nvidia comes as part of a broader weekly review of semiconductor names.

The firm said it also likes Marvell (NASDAQ: MRVL) “a bit more given the selloff,” and is looking to “good numbers” from Broadcom (NASDAQ: AVGO) this week.

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