Nvidia shares could pop up another 23% as surging AI workloads stokes stronger demand for specialized hardware, Bank of America says
- Nvidia shares could rise 23%, Bank of America said in raising its price target on the chipmaker.
- AI workloads are rising and Nvidia's specialized hardware should benefit from stronger sales.
Nvidia's stock price could push to highs not seen in more than a year as the boom in artificial intelligence should bolster demand for its hardware, Bank of America said Wednesday.
The note from the BofA analysts come after Nvidia shares have already soared this year on the back of the ChatGPT craze. The stock was trading around $277 on Wednesday.
"Surging AI workloads in cloud/enterprise data centers could shift more computing horsepower/value towards specialized accelerators (such as NVDA Graphics Processing Units and custom chips from Broadcom/Marvell) and away from traditional x86-based INTC/AMD server CPUs," Vivek Arya, a senior analyst at BofA Securities, in a research report published Wednesday.
The bank said sales of specialized accelerators in 2023 could overtake those of worldwide standard x86 processors. Accelerators bolster AI and machine-learning applications.
With those factors in mind, BofA raised its price objective on Nvidia to $340 from $310 a share. It has a buy rating on the stock.
The new $340 target foresees the shares rising 23% from Tuesday's closing price of $276.67. The shares last traded above $340 on November 22, 2021, when they hit $346.47.
This year, Nvidia shares have spiked up 90% as investors pile into companies they see benefitting from the AI trend fueled by the popularity of OpenAI's ChatGPT language tool. Nvidia has garnered attention with its equipment that powers AI applications in cars and robots.
"The massively parallel computing capabilities of accelerator processors (such as NVDA GPU, or Broadcom-enabled Google TPU or Amazon Inferentia) is ideally suited to tackle the large datasets and training parameters in generative AI workloads," said Arya.
BofA sees a "crossover" this year leading to accelerator sales rising above $40 billion by 2025. This would mean at least a 37% compound annual growth rate from 2022 while x86 CPU sales grow at modest 3% CAGR, to $26 billion.
Arya said such growth would be positive for Nvidia and custom chip enablers Broadcom and Marvell but mixed for AMD and negative for Intel. In terms of Intel, 75% of its server CPU market share is exposed to competition from AMD, UK-based chip design company Arm Holdings and accelerator makers, he said.
Roughly 15% of cloud servers are accelerated, but AI adoption could drive the attach-rate toward 50% as more applications are written to take advantage of accelerators, said BofA.