BofA Global Research is expressing increased optimism regarding artificial-intelligence chip demand for Nvidia. Analyst Vivek Arya has reiterated his Buy rating for Nvidia stock and raised his share price forecast to $550 from $500.
According to Arya, the demand for Nvidia’s accelerators, driven by cloud and enterprise spending on AI, remains strong. He highlighted that Nvidia currently holds about 75% of the market for advanced AI semiconductors and can maintain its dominance in this segment.
Despite a 1.1% dip in Nvidia’s shares on Tuesday morning, Arya believes that the industry is still in the early stages of a spending shift towards AI infrastructure. Currently, only 10% of cloud servers are equipped with chips suitable for accelerating AI projects. Consequently, Arya raised his earnings estimate for Nvidia in 2024, projecting it to be $11.05 per share, up from $10.01. The increasing demand from data centers contributes to this upward revision.
Arya also justified Nvidia’s valuation, asserting that the company has stronger growth opportunities on the horizon.
One aspect that enhances Nvidia’s products is their exposure to generative AI, which has gained significant traction this year. This technology utilizes brute-force methodologies to create content by ingesting text, images, and videos. OpenAI’s release of ChatGPT last year sparked a surge in interest in generative AI. The chatbot, leveraging a language model that analyzes word relationships derived from online content, generates humanlike responses.
Wall Street exhibits largely positive sentiment towards Nvidia stock. According to FactSet, approximately 86% of analysts covering the company have buy ratings or the equivalent, while 12% have hold ratings.
