Nvidia Stock Gets a Boosted Price Target. Its AI Dominance Should Continue.

“Cloud/enterprise spending on AI [is] driving demand for [Nvidia chip] accelerators,” he wrote. “Within accelerators, NVDA can hold its dominance,” he wrote, adding the company has about 75% of the market for advanced AI semiconductors.

Nvidia shares were down by 1.1% to $459.70 late Tuesday morning.

Arya said the industry is in the early stages of a spending shift toward AI infrastructure, with only 10% of cloud servers enabled with chips suited to accelerate AI projects. He raised his Nvidia earnings estimate for 2024 to $11.05 a share from $10.01, citing rising demand from data centers.

Nvidia’s valuation is “justified given stronger growth opportunities ahead,” he wrote.

Nvidia’s products have high exposure to generative AI, which has been trending this year. The technology ingests text, images, and videos in a brute-force manner to create content.

Interest in this form of AI was sparked by OpenAI’s release of ChatGPT late last year. The chatbot uses a language model that generates humanlike responses based on word relationships it has found by digesting what has been written on the internet or in other text.

Wall Street is generally positive on Nvidia stock. According to FactSet, 86% of analysts covering the company have Buy ratings or the equivalent on the shares, while 12% have Hold ratings.

Write to Tae Kim at [email protected]