Nvidia (NVDA) stock jumped as much as 2.7% early Thursday, as Wall Street analysts reiterated their Buy ratings on the stock despite concerns about increased competition and the possibility that demand for AI chips could wane.
Over the past few days, Wall Street analysts at Bernstein, TD Cowen, Morgan Stanley (MS), and Trustee (TFC) maintained a bullish outlook on the company.
“All relevant industry contacts support the dominance and excellence of NVDA's full technology stack,” Truist Securities' William Stein wrote on Monday. He raised his price target on the stock to $204 from $169.
Following the nod from Wall Street, Nvidia shares rose as much as 4.8% on Wednesday. But the stock later reversed direction, finishing the day down around 1%, as stocks fell across the board following commentary from the Federal Reserve projects fewer rate cuts and steadier inflation in 2025.
Even with Thursday morning's rise, Nvidia stock is still about 11% off its all-time high of $148.88 in early November.
Nvidia shares have fallen as investors worry that its GPUs could lose share in the wider AI chip market given that its customers are developing their own custom chips. Google (GOOG) and Meta (META) developed chips with Broadcom (AVGO). Microsoft (MSFT), Tesla (TSLA), and Amazon (AMZN) also make their own custom chips. Broadcom's announcement that it is developing chips for two more clients is believed to be ChatGPT-maker OpenAI a An apple (AAPL), a boost to the chip maker's stock last week and sent Nvidia in the opposite direction.
These custom chips, called ASICs (Application Specific Integrated Circuits), could potentially threaten Nvidia's GPUs, given that they are cheaper and tailored to a tech company's specific AI needs. A Morgan Stanley report released on December 15 showed that custom chips used to run cloud AI services could grow their share of the overall AI chip market from 11% in 2024 to 15% in 2030.
Still, Morgan Stanley said “history is certainly on Nvidia's side” when it comes to maintaining AI chip market dominance. “We think ASICs have continued to improve, but Nvidia's strong execution continues to raise the bar for its competitors.”
It's a point on Nvidia of Bank of America semiconductor analyst Vivek Arya he repeated Wednesday in an episode of the Opening Bid podcast (video above).
In addition, there are concerns that Big Tech's spending on AI chips that fueled Nvidia's rise could slow down. Commentary from Microsoft and Google in their latest earnings reports indicate that their AI spending will grow more slowly in the future. And there is concerns that AI models are no longer improving at their previous innovative pace, which could also dampen investment.
