Long-time Nvidia skeptic D.A. Davidson has finally come around to our way of thinking. The analysts on Thursday raised their price target to $210 per share from $195. They also upgraded the Club stock to a buy from a hold, which had been maintained since at least the beginning of 2024. To trace the arch of D.A. Davidson’s shift in tone, we want to start with what we saw developing Monday, just days after fellow portfolio name Broadcom ‘s blowout earnings report . It was a pair trade: Investors were selling Nvidia and buying Broadcom. The thinking? Broadcom was now positioned so strongly in custom artificial intelligence semiconductors that it would start pulling demand away from Nvidia as hyperscale players started to focus more on their own workloads and sought to increase efficiency by developing workload-specific chips. While highly customizable, powerful, and certainly still the industry gold standard, Nvidia makes chips and AI infrastructure hardware that are not specific to any one company. The custom chips from Broadcom may not be more efficient than Nvidia’s graphics processing units (GPUs) when it comes to handling a variety of workloads. However, big tech companies might seek out Broadcom to design a chip to manage a ton of demand for a single type of workload. For companies that also create software, it can make a lot of sense to invest in so-called application-specific integrated circuits (ASICs) or, as Broadcom calls them, XPUs. Jim Cramer, and others on the Street, have pushed back on the idea that the AI infrastructure build-out taking place is somehow a zero-sum game. We argue that demand is so strong and so broadly based that there will be multiple winners. Rather than attempt to play Nvidia and Broadcom against one another, investors would be better served by acknowledging that each is the best at what it does – Nvidia for GPUs and Broadcom for XPUs – and betting on both of the stocks. NVDA AVGO YTD mountain Nvidia and Broadcom YTD That’s the same line of thinking that seems to have finally convinced the analysts at D.A. Davidson to upgrade Nvidia. In a note titled, “The Most Important Thing is the Only Thing,” the analysts wrote, “Our increasingly optimistic view of the growth in AI compute demand supersedes our list of concerns regarding NVDA.” To be sure, the D.A. Davidson still has concerns regarding Nvidia, including the rate of hyperscale cloud spending and the return on that investment, competition from names like Broadcom, increased competition from China, and energy bottlenecks. However, they ultimately conceded, at least for the time being, that the “overwhelming growth in demand for compute is the only thing that matters.” They added, “Nvidia should be able to sustain growth over the next two years, regardless of which segment that growth comes from.” We cited similar reasons for our Nvidia price target hike to $200 from $170 on Wednesday afternoon, in the throes of the Oracle stock boom on sky-high AI infrastructure demand projections. While we are not yet ready to take our 2 rating back to a buy-equivalent 1, Jim has been much more constructive concerning Nvidia than D.A. Davidson and even many of the Street bulls. As of Thursday, 91% of the analysts who cover Nvidia have a buy-equivalent rating on the stock, according to FactSet data. There are five with a hold rating, equal to 8% of the coverage group. The lone sell rating belongs to Seaport Global Securities. The average Nvidia price target, per FactSet, was just over $216, representing more than 20% upside to Wednesday’s $177 close. While Nvidia still has some work to do to get back to its record-high close of $183 on Aug. 12, Broadcom closed at a new high of $369 on Wednesday. Broadcom, which was down Thursday, has been on a roll, jumping roughly 20% since closing at $306 per share on the company’s Sept. 4 earnings night. The recent rally ballooned Broadcom to our biggest position by weight. In recognition of the stock’s incredible run and its now 5.3% portfolio weighting, we told Club members Thursday that we would have trimmed Broadcom, if not restricted. We generally aim to limit positions from getting too big and throwing off the diversification of the portfolio. (Jim Cramer’s Charitable Trust is long NVDA, AVGO. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
