Nvidia is a top AI contender, stock could rise 15% as demand grows

Nvidia CEO Jensen Huang

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Morgan Stanley raised its price target on Nvidia to $500, calling the stock a “best of the best.”
Analysts said demand has picked up since the company’s blockbuster earnings last month.
Nvidia is also taking orders from customers that were previously not considered large buyers.

Morgan Stanley said Nvidia’s stock has more room to rise as demand has only picked up since last month’s blockbuster earnings report.

Analysts have raised their price target on Nvidia, which has wowed Wall Street with an artificial intelligence chip, to $500 from $450, up 15% from current levels.

That’s even though its stock has already surged 200% year-to-date, joining a handful of other tech giants with more than $1 trillion in market capitalization.

Morgan Stanley also named Nvidia its new “top pick”, stripping the title from its previous holder, rival chip stock AMD. Analysts say Nvidia has more short-term upside and are expected to become the only company to beat expectations and raise its outlook during the calendar year.

“Since NVIDIA’s report, the demand landscape for AI training has continued to improve, with our industry contracts reporting new orders daily from customers who were previously not envisioned as key customers,” the memo said. It is

Last month, NVIDIA raised its second-quarter earnings forecast to $11 billion, more than 50% above consensus, on the back of growth in the generative artificial intelligence market. The company’s AI chipsets help power the technology behind OpenAI’s ChatGPT and Alphabet’s Bard chatbot.

Morgan Stanley called NVIDIA “the cleanest story in AI hardware,” saying that investments are shifting rapidly from traditional server infrastructure to AI infrastructure.

“We have been positive since we raised the stock earlier this year, but not as optimistic as hoped,” analysts said.

Not only are existing customers spending faster, but app developers, corporate IT departments and even governments are expected to spend more, according to the memo.

While the numbers may not be sustainable in the long term, Morgan Stanley expects “capital intensity to increase further” over the next few years.

“Frankly, these market comments are the most positive we’ve heard in our 29 years of covering semiconductor stocks.”