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An Nvidia Grace CPU Superchip.
Marlena Sloss/Bloomberg
New Street Research says Wall Street analysts are still underestimating AI-related revenue prospects for three tech companies.
“In recent months, expectations for data center AI infrastructure rollouts in 2024 have roughly doubled,” analyst Pierre Ferragu wrote in a note to clients on Tuesday. “Our overall conclusion is that expectations for 2024 still have room to rise, especially for
Nvidia
,
but also for
Broadcom
And
Arista
.
”
Nvidia
(ticker: NVDA) shares rose 0.4% to $439.45 in early trading on Tuesday, while
Broadcom
(AVGO) stock fell 1.1% to $844.80.
Arista Networks
(ANET) shares rose 0.2% to $178.48.
Nvidia dominates the market for chips used for AI applications, so it can take advantage of generative AI, software that ingests text, images and videos to create content. Interest in this form of AI was fueled by OpenAI’s release of ChatGPT late last year.
Ferragu says that while Nvidia’s current revenue constraint is its advanced chip packaging capability, dubbed CoWoS, at
Taiwanese semiconductor manufacturing
,
he expects the semiconductor foundry to double that next year. If that happens, Nvidia could exceed current expectations for data center revenue in 2024 by more than 33%, according to Ferragu’s analysis.
The analyst is also optimistic about Broadcom’s ability to outperform expectations over the coming year due to the huge demand for AI. “Broadcom’s expectations also leave meaningful room for further revisions,” he wrote.
Revenue from the chipmaker’s semiconductor business could exceed the current average fiscal 2024 forecast by more than 15%, he said.
Ferragu is less confident about quantifying earnings for Arista’s revenue, but he believes the consensus forecast for the network equipment maker is also “too low,” he said.
Write to Tae Kim at [email protected]
