Analysts at Morgan Stanley, led by Joseph Moore, have issued an updated report on NVIDIA (NVDA). The report notes that NVIDIA currently holds an approximately 85% market share in AI chips, with no significant loss of share observed over the past two years. Moore wrote in the research note that the Vera Rubin platform is the central lever for NVIDIA to maintain its exceptionally high market share.

The analysts indicated that NVIDIA's in-house developed CPU is not intended to fill a general industry CPU shortage gap. Instead, the product is custom-designed from its underlying architecture specifically for AI computing workloads.

NVIDIA has provided revenue guidance of $20 billion for its server CPU business this year. This figure positions it against leading industry players and was met with widespread market skepticism upon announcement. However, after surveying major enterprise clients, the institution confirmed the product line's vast potential shipment volume.

Morgan Stanley maintains an Overweight (Buy) rating on NVIDIA with a price target of $288. The valuation logic is based on a weighted earnings per share estimate of $13.08 for 2027, applying a 22x price-to-earnings multiple.

Moore's view is that compared to competitors in the computing chip space like AMD, Broadcom, and Intel, NVIDIA's current valuation appears discounted. However, constrained by its extremely high market share and gross margins, the potential for significant near-term multiple expansion is limited.

Key Downside Risks

Weaker-than-expected AI end-market demand, leading clients to substantially cut GPU procurement orders.

AMD evolving into a GPU competitor with substantial competitive capabilities.

Cloud providers, beyond Google, successfully developing competitive in-house hardware, creating effective competition.

Potential Upside Catalysts

Sustained high growth in demand for large model training and inference, driving data center business revenue.

Rapid increase in penetration of AI PCs equipped with discrete GPUs, accelerating growth in consumer and gaming business revenue.