$NVDA William Blair Starts at Outperform

$NVIDIA (NVDA.US)$ AI Tailwinds in Semis. Broadcom is targeting $12 billion in AI revenue in fiscal 2024, with roughly two-thirds coming from its custom chip business (which co- develops Google’s TPUs and Meta’s MTIA accelerators) and one-third related to its Ethernet networking solutions (Jericho, Trident, Tomahawk, PCIe, NICs). We see room for continued steady growth going into fiscal 2025 and 2026 driven by increasing custom chip demand, improved software monetization, recovery in non- AI semis, and accelerating growth of Ethernet AI network fabrics built on top of Broadcom’s networking solutions—Ethernet is just starting to displace InfiniBand as the solution of choice for AI networks. Lastly, our 10-year DCF valuation for the stock indicates a roughly $162 fair value (39% upside from the current share price). While we expect to see some cyclicality in demand likely starting in 2027 with a deceleration in revenue growth and margin contraction driven by increased competition, we still expect a roughly 21% top-line CAGR over this 10-year period, with free cash flow growing at a 17% CAGR over that same period.

Nvidia's data center revenue skyrocketed by 217% in fiscal 2024 and is expected to grow by 132% in fiscal 2025, reaching over $110 billion, up from just $15 billion in fiscal 2023.

Nvidia's growth is its system-level approach, which has expanded its total addressable market (TAM) from around $100 billion in GPUs to the broader $800 billion semiconductor and $1.6 trillion cloud services markets.