Morgan Stanley analysts find a strong visibility for Nvidia for the next 3-4 quarters amid the AI boom.
On Monday, August 14, Nvidia (NASDAQ: NVDA) stock price gained by a straight 7% after banking giant Morgan Stanley reported that the chip manufacturer would immensely benefit from the ‘massive shift’ in artificial intelligence.
The company stands to benefit from the rapid developments in the generative AI space. Monday’s NVDA stock price surge suggests investors believe that Nvidia’s GPUs will be the most popular computer chips powering large language models (LLMs).
In their report on Monday, Morgan Stanley said that Nvidia continues to be their “Top Pick”. This bullishness comes following Nvidia’s earnings report which offers a better-than-expected forecast. The Morgan Stanley analysts wrote:
“We think the recent selloff is a good entry point, as despite supply constraints, we still expect a meaningful beat and raise quarter – and, more importantly, strong visibility over the next 3-4 quarters. Nvidia remains our Top Pick, with a backdrop of the massive shift in spending towards AI, and a fairly exceptional supply demand imbalance that should persist for the next several quarters.”
Nvidia (NVDA) Stock Rally
Nvidia (NASDAQ: NVDA) has been one of the best-performing stocks on Wall Street this year in 2023. Since the beginning of the year, the NVDA stock price is already up by a staggering 205% and is currently trading at $437.
The company has registered a massive rebound following the tech slump of 2022. In fact, the NVDA stock price is trading much higher than the peak of the 2021 bull run. As a result, the company has managed to join the trillion-dollar club in terms of its valuations.
Despite a slight decrease of over 10% in Nvidia’s stock this month, which is in part due to supply limitations and ongoing worries about the overall economy and its potential recovery, the analysts at Morgan Stanley anticipate that Nvidia will gain advantages in the long term. The analysts wrote:
“The bottom line is that this is a very positive situation, October numbers are entirely gated by supply, and the upper end of the buy side consensus has been reined in. We see numbers are going up at least enough that this stock will trade at P/Es more similar to the upper end of semis, with material upside still ahead.”
The company is already working on new chips that are set to cut the costs of running LLMs. At present, Nvidia holds a commanding position in the AI chips sector, commanding a market share exceeding 80%. This dominance can be attributed to their expertise in producing graphics processing units (GPUs), which have emerged as the preferred chips for significant AI models like OpenAI’s ChatGPT and Google’s Bard, both pivotal in generative AI software.