Chipmaker Nvidia launched another new chip on Tuesday that will allow the build of AI models 3x the size.
NVDA – Weekly Chart
NVDA has surged this year on AI hype, but the company’s first-quarter results showed a 50% increase in forward guidance on surging chip sales. NVDA has support at the $444 level, with the stock possibly taking a rest before the earnings release.
“To meet surging demand for generative AI, data centers require accelerated computing platforms with specialized needs,” Nvidia CEO Jensen Huang said in a news release.
The company will release its latest earnings on 23 August, but Bank of America sees the potential for “less shock and awe”. The bank still sees a strong picture long-term, and analyst Vivek Arya has a price target of $550.
“We expect the sentiment to be a bit more measured. Demand isn’t the issue, its supply and importantly the pace with which US cloud service providers are able to set up genAI compute instances,” Arya said.
“Investors will look for clues on sustainability of these elevated forecasts considering a lukewarm US cloud service provider capex environment,” Arya added. “Listen for management commentary around continued sales acceleration.”
The BofA analyst thinks Nvidia can see its sales grow at 26% CAGR to $109 billion, following $27 billion last year.
The new Grace Hopper Superchip, with the world’s first HBM3e processor, is built for accelerated computing and generative AI, with up to 3.5x more memory capacity and 3x more bandwidth than the current chips. The company said the cost of building AI models will drop significantly with the new model.
BofA is not the only bank that expects enormous revenue growth at Nvidia, with Mizuho also seeing the potential to upsize earnings.
He expects Nvidia to maintain its dominant position in AI chips until at least 2027. The company could generate around $300 billion in AI-specific revenue by 2027 with a 75% market share of AI server units, according to Vijay Rakesh. That’s 10 times his projection of $25 billion to $30 billion in AI revenues this year.
Rival chipmaker AMD launched its own AI chip last week, but Nvidia has raised the bar again as it seeks to crowd out the competition.
