Stocks rose on Thursday as analysts welcomed the results showing that the artificial intelligence boom is still supporting their growth. It also eased concerns about supply constraints and demand drive by Chinese customers.
(Stock ticker: NVDA) the stock rose 7.7% to $507.55 It was in pre-sale trading on Thursday after its quarterly earnings forecast came in well above analyst expectations.
Not only has Nvidia outperformed expectations, but it has also addressed many concerns about whether its progress is sustainable. The company said it expects to increase supply of the products in the next fiscal year, alleviating concerns that it will be unable to meet the growing demand for AI chips.
“With the vision extending into ’24,[Nvidia’s]management has qualified additional suppliers … and expects to increase supply every quarter through next year to meet demand,” KeyBanc analyst John Vinh wrote in a research note.
Vinh raised its price target for Nvidia to $670 from $620 and retained the stock’s overweight rating. The new target is based on an expected price-to-earnings multiple of 35 times for 2025.
Revenue from China was within the company’s historical range of 20% to 25%, indicating that the cadence was not driven by Chinese orders that were delayed due to concerns about future US restrictions.
UBS analysts noted that Nvidia has indicated that it could reallocate Chinese shipments of the A800 and H800 chips — which have a deliberately limited capacity to meet US export restrictions — if necessary. They maintained a Buy rating on the stock and raised their price target to $560 from $540.
Nvidia executives told analysts on an earnings call that additional export restrictions of data center graphics processing units (GPUs) to China would not have an immediate material impact on its financial results but would result in the loss of a long-term opportunity for Nvidia. we
Nvidia wasn’t the only stock gaining in the wake of its report, as investors bet that AI would boost the growth of other hardware and software companies. Chip maker
Advanced Micro Devices
(AMD) rose 2.3% in the premarket, while
(MSFT) gained 1.8% and is the parent company of Google
(Google) shares rose 1.4%.
However, Nvidia’s huge gains indicate that it seems poised to remain the market’s favorite bet on AI technology for the time being.
“Nvidia remains the cleanest game on AI adoption”
Rick Schafer wrote in a research note that he raised his price target on Nvidia to $650 from $500 and maintained an outperform rating on the stock.
Competition does not appear to be an immediate concern. Nvidia executives emphasized the move toward GPUs for powering artificial intelligence tools and away from general-purpose processors. It is estimated that Nvidia currently has around 90% of the AI-related GPU market share.
“Strong competition is important for a healthy innovation ecosystem. The market must want to see another player and must want to see the next digital transformation boom more pervasive and enduring versus an irrational exuberance bubble,” said Daniel Neumann, CEO of technology research firm Futurum Group.
Newman said that the Nvidia report showed that there should be opportunities for companies such as AMD and
(INTC) to deliver competitive AI slideshows. However, he noted that the window for growth of alternatives could narrow as Nvidia increases the attractiveness of its platform through software development and industry partnerships.
Intel rose 0.1% in premarket trading.
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