Nvidia will soar 18.5% as the market’s top semiconductor stock because their chips work most seamlessly with AI and they already have a head start, Credit Suisse says
- Nvidia stock is set to hit $275 due to its leadership in AI, according to Credit Suisse.
- In a broad overview of top artificial intelligence stocks, analysts cited its GPUs and software.
- Nvidia shares have jumped more than 60% since the year’s start as ChatGPT has raised AI hype.
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When it comes to artificial intelligence, Nvidia is the top investment choice among US semiconductor companies, according to a Credit Suisse report.
Analysts at the bank have a $275 price target on the chipmaker, representing 18.5% upside from the report’s March 2 publication date. Shares have surged more than 60% so far this year as excitement around ChatGPT has created hype around artificial intelligence stocks.
After starting initially with graphics chips used in video games, Nvidia is now involved in making chips for AI applications ranging from autonomous vehicles to robots.
Characterizing Nvidia as the “leading silicon AI enabler,” Credit Suisse said its graphic processing units are at the core of AI development and machine learning.
In fact, Nvidia’s GPUs control 95%-100% of the market for computer training, and no challengers to this lead have ramped up yet, according to the report.
Additionally, while chips from rivals like Intel control the majority of the workload for AI inference — meaning the answers that chatbots produce from users’ prompts — Nvidia’s chips are increasingly gaining share in that market as well due to superior performance, analysts said.
“We expect GPUs, and specifically NVDA GPUs, to continue to taking share of the AI inference market over time,” they added.
Moreover, Nvidia’s software will be its “competitive moat” in AI that keeps other companies at bay, Credit Suisse said.
Much of today’s AI is developed on Nvidia-made programs — such as CUDA libraries — which can only function on their GPUs.
That plus Nvidia’s enterprise AI software, which essentially serves as the operating system for AI, will be very difficult for competitors to replicate, even if they can match the company’s hardware.
“While hardware secured NVDA’s leadership in AI silicon, we think software is what will enable NVDA to maintain that position,” the report said.
Nvidia has estimated its total addressable market in AI comes out to $600 billion, with $300 billion in hardware and $300 billion in software.
Credit Suisse is not alone in its bullishness. Nvidia will be the dominant computing engine that drives AI and the cloud sector for the next decade, Alger Vice President Ankur Crawford said last month.
“How can you not own this at some point?” she told CNBC as Nvidia stock soared after the chipmaker reported strong fourth-quarter earnings and talked up the potential of AI.