The decline in the end market demand due to macroeconomic weakness and inventory issues dragged chip stocks lower, including Nvidia (NASDAQ:NVDA). However, the growing buzz around AI (Artificial Intelligence) chips due to rapid adoption (thanks to the popularity of OpenAI’s ChatGPT) and versatility could act as a significant tailwind not just for NVDA but for other chip makers and designers too. What stands out is that Nvidia has already taken the lead in this space.
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During the Q4 conference call, NVDA’s CEO, Jensen Huang, said that “AI adoption is at an inflection point,” with Open AI’s ChatGPT capturing all the limelight. Huang added that “NVIDIA AI is essentially the operating system of AI systems today,” indicating solid growth opportunities as more enterprises develop and deploy AI strategies.
In addition, Nathan Benaich and Ian Hogarth, who publish a monthly newsletter analyzing the most important AI trends, said in their “State of AI Report 2022” that the AI compute infrastructure is “concentrated in the hands of Nvidia.”
All these show that Nvidia is well-positioned to take advantage of the developments in generative AI. Moreover, its AI Supercomputer, with a faster H100 chip, is in full production, will likely support its growth.
With strong growth opportunities ahead, let’s look at what Wall Street recommends for NVDA stock.
What’s the Prediction for NVDA Stock?
Wall Street is cautiously optimistic about NVDA stock as short-term macro headwinds cloud opportunities in the AI segment. Susquehanna analyst Christopher Rolland said that NVIDIA could outperform peers due to the momentum in AI. Rolland sees NVIDIA as the “premier player in AI with ChatGPT providing an additional large tailwind.”
NVDA stock has received 25 Buy, six Hold, and two Sell recommendations for a Moderate Buy consensus rating. While NVDA stock gained over 55% year-to-date, analysts’ average price target of $256.39 implies a further 12.96% upside potential.
Bottom Line
The ongoing sector-wide headwinds and macro uncertainty could restrict NVDA’s growth in the short term. However, the solid growth opportunity around AI chips and its dominant positioning in the category bode well for growth.
