Shares of Nvidia ( NVDA ) rose as much as 2.7% early Thursday as Wall Street analysts reiterated their Buy ratings on the stock despite concerns about increasing competition and the possibility that demand for AI chips could to decrease.
In recent days, Wall Street analysts at Bernstein, TD Cowen, Morgan Stanley (MS) and Truist (TFC) have maintained a bullish outlook for the company.
“All relevant industry contacts support the dominance and superiority of NVDA’s entire technology suite,” William Stein of Truist Securities wrote on Monday. He raised his price target for the stock from $169 to $204.
Following the nods from Wall Street, Nvidia shares rose as much as 4.8% on Wednesday. But the stock later reversed course and ended the day down about 1%, as stocks fell across the board after comments from the Federal Reserve predicting fewer interest rate cuts and stronger inflation in 2025.
Even with Thursday’s early morning gain, Nvidia stock is still down about 11% from its record close of $148.88 in early November.
Nvidia shares have fallen as investors worry its GPUs could lose share in the broader AI chip market as its customers develop their own custom chips. Google (GOOG) and Meta (META) have developed chips with Broadcom (AVGO). Microsoft (MSFT), Tesla (TSLA) and Amazon (AMZN) also make their own custom chips. Broadcom’s announcement that it will develop chips for two more customers, believed to be ChatGPT maker OpenAI and Apple (AAPL), boosted the chipmaker’s shares last week and sent Nvidia’s in the opposite direction.
These custom chips, called ASICs (Application-Specific Integrated Circuits), could potentially pose a threat to Nvidia’s GPUs as they are cheaper and tailored to a tech company’s specific AI needs. A Morgan Stanley report released on December 15 found that custom chips used to run cloud AI services could increase their share of the overall AI chip market from 11% in 2024 to 15% by 2030.
Still, Morgan Stanley said that “history is certainly on Nvidia’s side” when it comes to maintaining dominance of the AI chip market. “We think ASICs have continued to improve, but Nvidia’s strong execution continues to raise the bar for its competitors.”
It’s a point about Nvidia that Bank of America semiconductor analyst Vivek Arya reiterated Wednesday on an episode of the Opening Bid podcast (video above).
Additionally, concerns that Big Tech could slow spending on AI chips that have fueled Nvidia’s rise. Comments from Microsoft and Google in their most recent earnings reports indicate that their AI spending will grow more slowly in the future. And there are concerns that AI models are no longer improving at the breakneck pace they used to, which could also put a damper on investment.
