Nvidia (NVDA) stock jumped as much as 2.7% early Thursday, as Wall Street analysts reiterated their Buy rankings on the stock despite concerns about rising competition and the likelihood that AI chip demand could wane.
Over the past few days, Wall Street analysts at Bernstein, TD Cowen, Morgan Stanley (MS), and Truist (TFC) have maintained bullish outlooks on the corporate.
“All relevant industry contacts support the dominance and superiority of NVDA’s full technology stack,” Truist Securities’ William Stein wrote on Monday. He raised his price goal on the stock to $204 from $169.
Following the nods from Wall Street, Nvidia shares rallied as much as 4.8% Wednesday. However the stock later reversed direction, ending the day down roughly 1%, as stocks fell across the board following commentary from the Federal Reserve projecting fewer rate cuts and stickier inflation in 2025.
Even with Thursday’s early morning gain, Nvidia stock continues to be off roughly 11% from its record close of $148.88 in early November.
Nvidia shares have fallen as investors worry its GPUs could lose share within the broader AI chip market provided that its customers are developing their very own custom chips. Google (GOOG) and Meta (META) have developed chips with Broadcom (AVGO). Microsoft (MSFT), Tesla (TSLA), and Amazon (AMZN) also make their very own custom chips. Broadcom’s announcement that it’s developing chips for 2 more clients, who’re believed to be ChatGPT-maker OpenAI and Apple (AAPL), boosted the chipmaker’s stock last week and sent Nvidia’s in the wrong way.
These custom chips, called ASICs (Application-Specific Integrated Circuits), could potentially threaten Nvidia’s GPUs, provided that they’re cheaper and tailored to a tech company’s specific AI needs. A Morgan Stanley report released Dec. 15 showed that custom chips used to run cloud AI services could grow their share of the general AI chip market from 11% in 2024 to fifteen% in 2030.
Still, Morgan Stanley said “history is actually on Nvidia’s side” with regards to maintaining dominance of the AI chip market. “We predict ASICs have continued to enhance, but Nvidia’s strong execution continues to boost the bar for its competitors.”
It’s a degree on Nvidia that Bank of America semiconductor analyst Vivek Arya reiterated Wednesday in an episode of the Opening Bid podcast (video above).
Moreover, concerns loom that the Big Tech spending on AI chips that fueled Nvidia’s rise could decelerate. Commentary from Microsoft and Google of their most up-to-date earnings reports indicated that their AI spending will grow at a slower pace in the longer term. And there are concerns that AI models aren’t any longer improving at their previous breakneck pace, which could also put a damper on investment.