The recent decline in end-market demand due to macroeconomic weakness and inventory issues has impacted chip stocks, including Nvidia (NVDA:NSD). However, the growing popularity of AI (Artificial Intelligence) chips, thanks to the rapid adoption of OpenAI’s ChatGPT and their versatility, could serve as a significant tailwind not just for NVDA but for other chip makers and designers as well. And Nvidia has already taken the lead in this space.
During the Q4 conference call, NVDA’s CEO, Jensen Huang, noted that “AI adoption is at an inflection point,” with Open AI’s ChatGPT capturing the spotlight. Huang also stated that “NVIDIA AI is essentially the operating system of AI systems today,” indicating significant growth opportunities as more enterprises develop and deploy AI strategies.
In addition, industry analysts Nathan Benaich and Ian Hogarth, who publish a monthly newsletter analyzing the most important AI trends, stated in their “State of AI Report 2022” that Nvidia has a dominant position in AI compute infrastructure.
All of these factors indicate that Nvidia is well-positioned to take advantage of the developments in generative AI. Moreover, its AI Supercomputer, with a faster H100 chip, is now in full production and is expected to support its growth.
Nvidia Stock Forecast:
Despite short-term macro headwinds, Wall Street remains cautiously optimistic about NVDA stock. Susquehanna analyst Christopher Rolland sees NVIDIA as the “premier player in AI” with ChatGPT providing an additional significant tailwind.
As of this writing, NVDA stock has a Strong Buy consensus rating with an average price target of $217.30, implying a further 12.96% upside potential from its current price.
Conclusion:
Although sector-wide headwinds and macroeconomic uncertainty could restrict NVDA’s growth in the short term, the solid growth opportunity around AI chips and its dominant positioning in the category suggests strong growth prospects in the long run.
