Why Nvidia's AI Chip Lead Is Sustainable
Nvidia's (NVDA) lead in the artificial intelligence market
is sustainable for years to come, a Wall Street investment bank says. Nvidia
stock rose in early trading Thursday.
In a report Wednesday, Loop Capital
Markets analysts Ananda Baruah and John Donovan said Nvidia's "longevity
potential" is underappreciated.
That assessment comes as some analysts fret about the
competitive threat from custom chips designed by hyperscale cloud service
providers working with fabless chipmakers such as Broadcom (AVGO) and Marvell Technology.
Meanwhile, Nvidia executives believe they are sitting
on top of a more than $2 trillion revenue opportunity in accelerated computing,
generative AI and inference and that "they can hold a material leadership
position in each," Loop Capital said.
Baruah and Donovan compared Nvidia's impact on
computing to musical group Nirvana, which had a "sea-change impact"
on the music industry and sustainable success.
The analysts rate Nvidia stock as buy with a price
target of 175. In premarket trading on the stock market
today, Nvidia stock rose 1.6% to 136.47.
Key to Nvidia's AI leadership is its expertise in the
total technology stack. That includes semiconductors, systems and software,
Loop Capital said. That stack along with its installed base of users create a
competitive moat, the firm said.
Nvidia Stock Is On Two IBD
Lists
"We believe
it's underappreciated the degree to which Nvidia has already created critical
'up the stack' capabilities that could be positioning them for moat-like
characteristics moving forward in both training and inference," Baruah and
Donovan wrote.
The first wave
of the generative AI computing trend was training and the next wave is
inference. AI training is the process of teaching an AI model to recognize
patterns and make predictions, while AI inference is when the model uses that
training to make predictions on new data.
"Nvidia may
already have a lock on inferencing and the game has just started," the
analysts said. "Nvidia is already positioned as the 'Gen AI Inference
Platform Of Choice' … and it isn't yet widely recognized."
That position is
evident in the 5 million developers in its AI ecosystem, thousands of developed
applications, and a presence with every relevant cloud provider and hardware
supplier, Baruah and Donovan said.
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