Anyone interested in AI stocks can hardly avoid the US chip company NVIDIA at the moment. Strategists expect rosy times for the company – despite recent reports of possible restrictions on chip exports to China.
• NVIDIA supplies AI hardware and software
• Most analysts recommend buying
• Trade conflict between USA and China
ChatGPT, Google Bard, xAI & Co.
Artificial intelligence (AI) is clearly one of the trending topics on the stock exchange this year. The hype surrounding AI tools began with the chatbot ChatGPT and the text-to-image generator DALL·E from the AI startup OpenAI, whose largest sponsors include the Windows developer Microsoft. In the meantime, other companies have also presented corresponding solutions, including Google’s mother company Alphabet with its ChatGPT competitor Google Bard. And also jack of all trades and OpenAI co-founder Elon Musk now apparently wants to make money in the AI industry after previously criticizing the rapid development of such applications. With xAI, another AI company is now in the starting blocks that should “understand the true nature of the universe”, according to the Tesla boss.
NVIDIA strong in the AI space
Another big AI market player – according to Piper Sandler analyst Harsh Kumar even the big AI winner – is the US chip group NVIDIA. The company supplies high-performance hardware that is required to operate numerous AI applications. According to TipRanks, Kumar assumes that around 80 percent of all “AI workloads” are currently running on NIVIDIA chips. ChatGPT should also be operated primarily on NVIDIA hardware, as reported by “Yahoo Finance”. In addition, the NASDAQ group itself is working on the AI applications NeMo, Picasso and BioNeMo. Earlier this month, NVIDIA also announced a collaboration with Snowflake, offering the cloud company’s customers the ability to build custom AI applications based on data stored in the cloud. A similar cooperation with ServiceNow was also presented in May.
NVIDIA stock up three digits year-to-date
Enthusiasm about NVIDIA’s commitment to AI can also be observed on the stock market: Since the beginning of the year, the chip giant’s shares in NASDAQ trading have already risen by 211.48 percent to USD 455.20 most recently (closing price on July 20, 2023). The company currently has a market capitalization of $1.16 trillion.
Evercore ISI expert expects strong jump in profits
If Evercore ISI expert CJ Muse has his way, the end of the road is far from over. For the full year 2023, both the performance of the paper and the company’s balance sheet should develop positively, as the strategist recently predicted in a customer note available to Yahoo Finance. “We continue to see upside potential for NVIDIA up to $10 EPS […]with our scenario implying growth to $30 by 2027,” Muse said. Fiscal first quarter earnings were $1.09 per share. “NVIDIA remains a top pick with bounces and increases along with positive AI-related headlines driving continued momentum for stocks (and likely the SOX as well) this year [Semiconductor Sector Index] support).” Established by the Philadelphia Stock Exchange, the Semiconductor Index includes stocks of the 30 largest U.S.-listed companies involved in the design, distribution, manufacture, and sale of semiconductors. Members include NVIDIA, industry giants such as AMD, QUALCOMM, Micron Technology, and TSMC.
Goldman Sachs raises price target for NVIDIA shares
And the major US bank Goldman Sachs is also confident about the NVIDiA share. “Supported by its competitive moat built on consistent investments in hardware and software, NVIDIA has been a key enabler and beneficiary of traditional AI for nearly a decade,” Money House analyst Toshiya Hari wrote in a note to clients, quoted by CNBC. “However, the company’s recent incremental increase in its data center revenue guidance suggests that the company has entered a new phase of growth, fueled by the emergence and proliferation of generative AI.” Due to these developments, the expert increased his price target for NVIDIA shares to $495 from the previous $440.
Other strategists are also positive about the chip group’s paper. NVIDIA shares received 30 buy recommendations on the TipRanks platform. This is offset by two “hold” ratings and one sell recommendation. The average price target of the experts is $484.30, with estimates ranging from $370.00 to $600.00.
Trade restrictions in prospect?
Nevertheless, the AI profiteer also has to face some challenges, above all the trade conflict between the USA and China, which has long since reached the chip industry. According to reports in the Wall Street Journal, the US government could impose new restrictions on the export of AI components to China in July. It was only in May that the government of the People’s Republic declared that they wanted to examine the use of components imported from the USA by the US chip manufacturer Micron, as these are said to entail significant security risks. Now the disagreements between the two largest economies could worsen. NVIDIA itself spoke out clearly against such restrictions. “Long term, restrictions prohibiting the sale of our data center GPUs to China would result in a permanent loss of opportunities for US industry to compete and lead in one of the largest markets in the world and impact our future business and financial results,” NVIDIA CFO Colette Kress warned at a conference in late June, according to the Economic Times. However, immediate material effects are not to be expected for the time being.
Number template on August 23
Despite the threat of trading restrictions, which also pushed down the share price for a short time and thus temporarily pushed the company’s market capitalization below the $1 trillion mark, Wall Street experts mainly expect a strong balance sheet presentation on August 23. Then NVIDIA will open the books for the second quarter of the fiscal year 2024. And things should continue to improve afterwards: According to Yahoo Finance, the majority of experts assume that the company should achieve sales of one billion US dollars in the current third quarter alone.
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