2023-04-18 21:38:00
Analyst from HSBC raises rating for Nvidia
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and indicates its position as a leader in the artificial intelligence industry. The company’s stock receives a rating upgrade to “buy” and a significant jump in the target price to $355 from $175. Which represents an upside of about 30%.
Frank Lee, head of technology at HSBC, said he had concerns following the decline in data center revenue over the past two quarters, in addition to the rise in the company’s inventory. Nevertheless, he believes that the pricing of Nvidia’s new chips designed for the artificial intelligence industry is stronger than these shortcomings and presents a serious change to the company’s revenue model. “We are shocked by Nvidia’s pricing power for the artificial intelligence chips that drive profits up and enable a higher valuation,” he wrote to me.
According to HSBC’s analysis, the artificial intelligence chips will sell for between 10 and 20 times the price of regular gaming chips, meaning that Nvidia will not need to increase its sales volumes to the levels expected in the past. The bank expects the company to dominate the Generative AI industry with a 90% market share by 2024, being significantly ahead of its competitors
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“Although it is still difficult to predict the size of the Generative AI market, Nvidia has the highest potential from the hardware side,” Lee wrote. The company has positioned itself as a leader in the artificial intelligence industry by using the word .AI in every public forum it is on. In the recent investor call, it mentioned AI more than70 twice.
Generative Ai products are roughly trained on text, images and videos to generate content. Interest in this type of artificial intelligence arose after OpenAI released ChatGPT late last year. The hope is that the need for the chips that Nvidia produces to train AI models for Generative AI-based services will contribute to the demand for the company’s products.
Analyst Stacey Rasgon wrote about two weeks ago, “We are at the beginning of the adoption curve (of new technology), over time we believe that the total target market value will reach billions of dollars as the artificial intelligence models become more complicated and more people adopt the technology”, Stacey raised the target price for Nvidia stock to $300 from $265 and said that the company’s forecasts “lean upwards” and the company’s stock is the best way to participate in the artificial intelligence craze.
Market estimates are that ChatGPT alone could generate $300 million in revenue for Nvidia. That’s a conservative guess, since according to another Citigroup estimate, the growing use of ChatGPT could increase Nvidia’s annual revenue by $3 billion to $11 billion, all in a market that generated $27 billion in revenue last fiscal year. The company trades at a value of 681 billion dollars and has already risen 89% since the beginning of the year.
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