Morgan Stanley has reinstated Nvidia as its top semiconductor pick, pointing to the chipmaker’s strong positioning in artificial intelligence and what the bank sees as an attractive valuation.
The call followed meetings with Nvidia CEO Jensen Huang, CFO Colette Kress and investor relations chief Toshiya Hari in New York and Boston.
Morgan Stanley Highlights Nvidia’s Valuation
Analyst Joseph Moore said Nvidia appears well positioned despite trading at what Morgan Stanley considers a relatively modest valuation.
The stock is currently valued at around 15 times the bank’s fiscal 2028 earnings estimate.
Morgan Stanley believes there is room for that valuation multiple to expand if investor enthusiasm around artificial intelligence strengthens again.
However, the bank also said Nvidia does not necessarily need a higher valuation multiple for the stock to perform well, especially if earnings forecasts continue to rise.
AI Bottleneck Shifts Toward Data Center Capacity
Morgan Stanley also highlighted a major change in the AI infrastructure market.
According to the bank, the key bottleneck is increasingly shifting away from chip production and toward the speed at which new data centers can be built, powered and financed.
This trend could work in Nvidia’s favor.
The company currently lists around 80 cloud partners, with 55 located outside the United States.
That global network could give Nvidia more flexibility to expand in regions where power and data center capacity are available.
Nvidia’s Customer Base Extends Beyond Big Tech
Another key strength is the diversity of Nvidia’s customer base.
Although investor attention often focuses on major hyperscalers and leading AI model developers, Morgan Stanley noted that roughly half of Nvidia’s business comes from a much broader group of customers.
These include AI model companies, neocloud providers, sovereign entities, original design manufacturers, original equipment manufacturers and enterprise customers.
The bank believes this broader segment may also be growing faster than Nvidia’s largest and most closely followed customers.
Nvidia Targets Higher Revenue Per Gigawatt
Morgan Stanley also pointed to Nvidia’s strategy of increasing the amount of revenue generated from each gigawatt of power used in AI infrastructure.
The company’s Feynman architecture, expected in 2028, could significantly improve this metric.
Morgan Stanley estimates that Nvidia could increase revenue per gigawatt from around $40 billion to well above $50 billion.
This could further strengthen the company’s position as demand for more efficient and powerful AI infrastructure continues to grow.
AI Agents Could Drive More GPU Spending
The rise of AI agents could provide another important growth opportunity for Nvidia.
Morgan Stanley expects AI agents to increase demand for CPUs, but believes the impact on GPU spending could be much larger.
That trend could support continued demand for Nvidia’s high-performance computing products as companies invest more heavily in advanced AI systems.
Nvidia Remains Central to the AI Investment Theme
Morgan Stanley’s decision to return Nvidia to the top of its semiconductor list reflects continued confidence in the company’s long-term AI growth story.
The bank sees Nvidia benefiting from a broad customer base, global cloud partnerships, improving infrastructure economics and continued growth in GPU demand.
For investors, the next key factors will be whether AI spending remains strong and whether Nvidia can continue delivering earnings growth that supports its current valuation.
