BofA Global Research is increasingly optimistic about the demand for artificial intelligence chips for
Nvidia
.
On Tuesday, analyst Vivek Arya reiterated his buy rating for
stock (ticker: NVDA) and raised its forecast for the chipmaker’s stock price to $550 from $500.
“Cloud/corporate spending on AI (fuels) demand for (Nvidia chip) accelerators,” he wrote. “Within accelerators, NVDA can maintain its dominance,” he wrote, adding that the company has about 75% of the advanced AI semiconductor market.
Nvidia shares were down 1.1% at $459.70 late Tuesday morning.
Arya said the industry is in the early stages of a shift in spending toward AI infrastructure, with only 10% of cloud servers equipped with chips suitable for accelerating AI projects. He raised his estimate of Nvidia’s earnings for 2024 to $11.05 per share from $10.01, citing growing demand from data centers.
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Nvidia’s valuation is “justified given the stronger growth opportunities ahead,” he wrote.
Nvidia’s products are heavily exposed to generative AI, which is all the rage this year. The technology brutally ingests text, images, and videos to create content.
Interest in this form of AI was sparked by OpenAI’s release of ChatGPT late last year. The chatbot uses a language model that generates human responses based on word relationships it has found by digesting what has been written on the internet or in other texts.
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Wall Street is generally positive on Nvidia stock. According to FactSet, 86% of analysts covering the company have buy ratings or the equivalent on the stock, while 12% have hold ratings.
Write to Tae Kim at tae.kim@barrons.com
