Key Morningstar metrics for Nvidia

  • Fair Value Estimate: $310.00
  • Morningstar Rating: ★★★★
  • Morningstar Economic Moat Rating: Wide
  • Morningstar Uncertainity Rating: Very High

Nvidia NVDA formally announced its acquisition of Hugging Face, a large language model platform, for $12.9 billion. The company intends to support and scale up Hugging Face to continue to serve LLMs, including open-source models.

Why it matters: Financially, we view the deal as immaterial to Nvidia’s future results. Strategically, we think it improves Nvidia’s position within the open-source community—not only to serve its own model, Nemotron, but also to expand the use of open-source models more broadly.

  • Like Nvidia, we see a world where open- and closed-source models coexist. We anticipate that open-source will be used to cost-efficiently handle heavy, monotonous workloads, while closed-source (like Claude) will offer premium tokens for mission-critical workloads and knowledge.
  • It seems unlikely to us that any LLM builders will move off Hugging Face now that it is owned by a large company (perhaps with a conflict of interest, as Nvidia has an LLM), but the risk is plausible if Nvidia were to unthinkingly tilt the scales toward itself.

The bottom line: We maintain our $310 per share fair value estimate for wide-moat Nvidia. It’s hard to gauge the stock move related to this news, since shares remain in the afterglow of Nvidia’s stellar earnings report last week. Shares remain undervalued as the durability of artificial intelligence growth appears to be underestimated.

  • Overall, Nvidia remains focused on building AI systems and expanding the AI ecosystem. We think this is a wise offensive move, but also defensive. If a world exists where Anthropic and OpenAI both shift to using more in-house chips, Nvidia may emerge with more competitive models.