Nvidia Has ‘Two Glaring Holes’ In Its Data Center Offering

As Nvidia (NVDA) looks to maintain its dominance in the AI data center market, it might need to fill some holes in its product lineup, a Wall Street analyst says. Nvidia stock fell Friday.

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Susquehanna Financial Group analyst Christopher Rolland said the AI systems powerhouse has “two glaring holes” in its data center offering: optical and analog networking. It may need to make an acquisition or two to fill those holes, he said in a client note Thursday.

Nvidia’s strength in AI comes from its vertical integration of semiconductor design, CUDA software and holistic systems, Rolland said.

“As Nvidia attempts to further solidify its lead in both systems and networking, we believe it may increasingly look to insource or acquire optical and/or analog interconnect technologies, companies, or divisions,” Rolland said.

Possible Acquisition Targets

Rolland rates Nvidia stock as positive with a price target of 160. On the stock market today, Nvidia stock slid 2.2% to close at 121.35.

As clusters of graphics processing units scale, the need for interconnections grows exponentially, Rolland said. Given the importance of networking to such systems, Nvidia might look to add expertise in a number of optical and analog networking technologies, he said.

Companies with such technologies include Lumentum (LITE), Coherent (COHR), Applied Optoelectronics (AAOI), Semtech (SMTC), Marvell Technology (MRVL), MaxLinear (MXL), Macom Technology Solutions (MTSI), Credo Technology (CRDO), Intel (INTC), Lightmatter and Ayar Labs.

Nvidia Stock On Four IBD Lists

Meanwhile, Nvidia stock investors’ focus has been on when the chipmaker will ship its next-generation processors, known as Blackwell.

Taiwan-based technology analyst Tim Culpan said in a blog post Wednesday that Nvidia will start delivering the first racks of its GB200 servers to major cloud service providers in early December. That’s about one month later than originally planned, but sooner than many had feared, he said.

Microsoft (MSFT) will get the largest allocations of Nvidia’s most-advanced AI chips, Culpan said. Amazon (AMZN), Meta Platforms (META) and Oracle (ORCL) are other top customers, he said.

Nvidia stock is in a 15-week consolidation pattern with a buy point of 140.76, according to IBD MarketSurge charts. But IBD analysis offers an alternative buy point of 131.26.

Further, Nvidia stock is on four IBD stock lists: IBD 50, Stock Spotlight, Leaderboard and SwingTrader.

Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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