NVIDIA (NVDA +1.90%) stock popped 4.9% to close at $221.21 per share on Monday. For context, the S&P 500 and the tech-heavy Nasdaq, which both hit record highs during the day, closed up 0.8% and 1.3%, respectively.
Monday's jump brings the graphics processing unit (GPU) specialist stock's return to 66% in 2019. With this year's strong performance, shares of the former high-flying tech darling are now just 21% off their all-time closing high, set in October 2018.
Here's what investors should know about NVIDIA stock's Monday move up.
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Chip stocks rally on trade optimism
NVIDIA stock got a boost from overall market dynamics. The market rally on Monday was thanks largely to reports that the United States and China were nearing a cease-fire in the trade war and that a pact might still be accomplished by the end of the year.
Tech stocks -- most notably, chip stocks -- were particular winners, as the trade battle has negatively impacted many of them. For instance, shares of Intel and Advanced Micro Devices, or AMD -- NVIDIA's arch-rival in the discrete GPU space -- were up 2.1% and 1.6%, respectively. So, it's probably safe to assume that NVIDIA stock got a lift in the same general ballpark from the general market conditions.
NVIDIA stock got some (more) love from Wall Street
The second catalyst for NVIDIA stock's Monday spike was a Wall Street upgrade. The Morgan Stanley analyst who covers the stock raised his rating on it to overweight, from neutral. He also increased the firm's price target to $259 per share, up a hefty 19% from the previous target of $217. NVIDIA stock closed at $221.21 on Monday, so the firm believes the stock still has upside of about 17% over the near term.
The Morgan Stanley note acknowledged that NVIDIA's gaming and data center platforms -- its two largest -- fell short of expectations in calendar year 2019, but said that both are poised to return to solid growth in 2020. The analyst called out two catalysts for growth, according to the fly.com: investments made this year in the gaming business and conversational artificial intelligence (AI) in the data center business.
Indeed, NVIDIA's gaming and data center businesses had issues that surfaced late last year, which resulted in its stock price being cut in about half in the fourth quarter of 2018. The company's fiscal third-quarter 2020 results show that both businesses are continuing to bounce back nicely, as both showed sequential revenue growth. Gaming's primary issue was an excess of graphics cards in the retail channel, stemming from last year's cryptocurrency bust. The data center platform's sluggish growth was due to concerns among customers about a slowing global economy, according to NVIDIA CEO Jensen Huang, who has long maintained that the "pause" was just temporary.
What's an investor to do?
While the boost NVIDIA stock received from the Morgan Stanley upgrade was certainly welcome news, long-term investors should pay little attention to Wall Street's moves. The Street is notoriously focused on the short term.
NVIDIA stock has long been a buy in my book. There is arguably no other pure-play tech company that is poised to profit from as many massive emerging growth trends. Alphabet is probably a close second. NVIDIA stands to benefit from growth in the AI, gaming, driverless vehicle, drone, and virtual reality (VR) markets, among others.
