NVIDIA's Deal With Alibaba Highlights Cloud Opportunity

Shares of NVIDIA Corporation (NASDAQ: NVDA) were trading higher by more than 2 percent on Friday as investors and traders were encouraged by the prospects of its new partnership with Alibaba Group Holding Ltd (NYSE: BABA)'s cloud unit, AliCloud.

Mark Lipacis of Jefferies commented in a note that AliCloud will partner with around 1,000 data developers and ultimately become a $1 billion business. The analyst stated that partnering with Nvidia will "make it happen."

Related Link: Nvidia Details New Partnership With Alibaba's Alicloud

Lipacis continued that the partnership represents just one of many similar announcements between hyperscale cloud companies and "highlights one of the growth legs that underpins our Buy thesis."

Finally, Lipacis pointed out that Nvidia's cloud business has grown at a 31 percent compounded annual growth rate over the past three years and represents 6 percent of revenues. The analyst added that he expects the cloud segment to continue driving growth moving forward.

Shares of Nvidia remain Buy rated with an unchanged $38 price target.