“I am shocked at Nvidia’s pricing power over AI.”
Nvidia (NVDA) shares surged on Tuesday after HSBC analysts’ announcement. It has become bullish on semiconductor makers, citing its position as a leader in artificial intelligence.
HSBC now has a Buy rating on the stock and has more than doubled its previous price target to $355, reflecting a nearly 34% gain from Tuesday’s opening.
HSBC’s head of technology, Frank Lee, said the decline in Nvidia’s data center revenue over the past two quarters and rise in inventory. But he believes the pricing of AI chips will counteract those headwinds and change Nvidia’s revenue model.
“I am particularly shocked that Nvidia’s pricing power over AI chips is boosting revenue and boosting valuations,” Lee wrote.
HSBC’s analysis shows that AI chips will sell for 10 to 20 times more than standard gaming chips, so Nvidia doesn’t need to increase sales to levels previously expected. The company sees Nvidia dominating the generative AI space with a 90% market share in fiscal 2024. This is far superior to regular competitors such as Advanced Micro Devices (AMD), Intel (INTC) and Micron (MU).
“Overall [total addressable market] Predicting generative AI remains challenging, but Nvidia has the greatest potential leverage from a hardware perspective,” Lee wrote.
Since ChatGPT launched in beta in late November, investors have rewarded companies on the AI hype train and downplayed those emerging behind the eight ball.
Microsoft (MSFT) shares are up more than 26% since January 10, when rumors of an investment in ChatGPT first surfaced. Two weeks after him, the software giant announced that the company behind it would invest several years and billions of dollars in OpenAI. A chatbot with artificial intelligence.
Alphabet’s (GOOGL) stock nearly matched Microsoft’s gains at the start of the year, but ran into AI news such as a failed search rollout and Samsung’s possible purchase of a new search engine.
The same story played out in the online education sector, where Chegg (CHGG) saw its share price drop to 44 in about five months on concerns that ChatGPT could steal market share and a weaker-than-expected full-year earnings guidance. I see it as % down. However, a new partnership with OpenAI saw its share increase by about 10% last week.
NVIDIA uses Microsoft’s playbook to establish itself as a frontrunner in AI on all public forums. The company mentioned AI more than 70 times in its last quarterly earnings call.
Nvidia’s stock has also followed its AI hype strategy, jumping about 85% this year. The rise is more than double his share price gains in chip competitor AMD. Meanwhile, Intel’s stock is barely above his Nasdaq Composite.
Josh is a reporter at Yahoo Finance.
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