Aug 09, 2023

Nvidia, a chipmaker, released a new chip on Tuesday that will allow the development of AI models that are three times larger than current models.


NVDA – Weekly Chart

Nvidia stock has seen a surge in value this year due to the hype surrounding artificial intelligence, but the company’s first-quarter results showed a 50% increase in forward guidance due to surging chip sales. Nvidia has support at the $444 level, and the stock may take a break before the earnings release.

Nvidia CEO Jensen Huang said in a news release that data centres need specialised accelerated computing platforms to meet the growing demand for generative AI.

The company will release its latest earnings on August 23, but Bank of America believes that the results may not be as impressive as previous quarters. However, the bank still has a positive outlook for the company’s long-term prospects, and analyst Vivek Arya has a price target of $550.

Arya said, “We expect sentiment to be more cautious. Demand is not the issue, it is supply and, more importantly, the pace at which US cloud service providers are able to set up genAI computing instances.”

Arya added that investors will look for clues on the sustainability of these elevated forecasts, given the lukewarm US cloud service provider capex environment. He also advised investors to listen for management commentary on continued sales acceleration.

BofA analyst predicts Nvidia’s sales will grow at a compound annual growth rate (CAGR) of 26% to $109 billion in the next five years, up from $27 billion last year.

The new Grace Hopper Superchip, which features the world’s first HBM3e processor, is designed for accelerated computing and generative AI. It has up to 3.5 times more memory capacity and 3 times more bandwidth than current chips. The company claims that the cost of building AI models will drop significantly with the new model.

BofA is not the only financial institution that predicts massive revenue growth for Nvidia, as Mizuho also sees the possibility of earnings increases.

Vijay Rakesh, an analyst, predicts that Nvidia will maintain its dominance in the AI chip market until at least 2027. He believes that the company could generate around $300 billion in AI-specific revenue by 2027, with a 75% market share of AI server units. This is ten times his projection of $25 billion to $30 billion in AI revenues this year.

Nvidia’s rival, AMD, launched its own AI chip last week, but Nvidia has upped the ante in its quest to edge out the competition.

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