Elon Musk’s artificial intelligence (AI) venture, xAI, is preparing to make a massive chip purchase from Nvidia (NVDA). According to a report from CNBC, the company is set to close out a funding round next week, during which it has raised roughly $6 billion to buy 10,000 AI chips from Nvidia. These critical components will be used at xAI’s data center in Memphis, Tennessee, where it is working on a supercomputer.
While NVDA stock is struggling today, this development could help it rebound soon, as xAI is likely to have a significant need for chips as its work progresses.
What’s Happening with Nvidia Stock Today?
It’s been a fairly volatile week for Nvidia stock, which looks poised to close out trading for the past five days in the red. As of this writing, shares are down 3% for the day, due mostly to negative market momentum. That said, NVDA stock has enjoyed an excellent quarter, during which it has recovered from the September 2024 slump to rise 140% through unfavorable market conditions.
Now Nvidia investors can take comfort in the fact that it has a new customer with ambitious plans. Musk is focused on using xAI to develop a supercomputer that is expected to revolutionize Tesla’s (TSLA) full self-driving technology. If it progresses, Musk will likely be making further Nvidia chip purchases, thus creating a likely growth catalyst for NVDA stock.
Additionally, Musk’s relationship with President-elect Donald Trump could lead to more favorable policies for companies in the AI space. TSLA stock has already benefited from Musk’s ties to Trump, and his other companies could as well. If they continue to grow, Nvidia is likely to benefit as long as it remains the primary chip provider for xAI.
Wall Street Remains Bullish on NVDA Stock
Wall Street has been bullish on Nvidia all year but now this news from xAI could lead to more positive predictions. Analysts have a Strong Buy consensus rating on NVDA stock based on 39 Buys and three Holds assigned in the past three months, as indicated by the graphic below. After a 185% rally in its share price over the past year, the average NVDA price target of $157.82 per share implies a 12% upside potential.
