Nvidia makes the machines that power things like OpenAI’s ChatGPT
Nvidia Corp. earnings received a warmup Tuesday as Microsoft Corp. and the graphics-processing-unit giant announced a 10-year partnership to bring Activision Blizzard Inc.’s catalog as well as Xbox games to Nvidia’s cloud gaming service GeForce Now.
That redirects focus on Nvidia’s NVDA, -3.43% data-center sales and the contribution from public cloud providers like Microsoft’s MSFT, -2.09% Azure. In late January, Microsoft also announced a new investment into OpenAI, the startup behind ChatGPT, as well as plans to deploy the startup’s AI tech across its services.
UBS analyst Timothy Arcuri raised his price target to $270 from $200 and kept his buy rating, saying he remains “very optimistic about the longer-term generative AI opportunity and both the hardware/software [total-addressable market] that is opened up as [Nvidia’s graphics processing unit] Hopper is really the only viable solution for training these massive models — ‘longer-term’ is the key though.”
“On top of rapidly proliferating new revenue streams (direct software licensing, Microsoft cloud supercomputer deal, Grace Hopper CPU, etc.), there is so much here to like,” Arcuri said.
“We are at the tipping point of a huge monetization event with AI — specifically Large Language Models (LLM) which will drive meaningful training and inference demand for Nvidia products,” said Evercore ISI’s C.J. Muse, who reiterated his outperform rating on what he called “one of the best growth names in all of tech.”
“This is the main story for Nvidia today as OpenAI’s ChatGPT launch has seemingly sparked the chatbot wars across hyperscalers (where Nvidia is a prime beneficiary),” Muse said.
Susquehanna Financial analyst Christopher Rolland, who has a positive rating on the stock, raised his price target to $265 from $185 because of the AI connection.
“While Data Center guidance from Intel INTC, -5.61% and [Advanced Micro Devices Inc.] AMD, -2.20% were poor for 1H, Nvidia has an opportunity to outperform peers given the momentum behind AI and newly launched applications like ChatGPT,” Rolland said. “While hyperscale capex has contracted of late, commentary suggests continued investment in AI (Meta META, -0.46% ) which could point to sustained spending for H100/A100. “
Also on Tuesday, Microsoft announced 10-year partnerships with Nvidia and Nintendo Co. 7974, -1.50% in an apparent attempt to appease antitrust regulators who are blocking a deal to acquire Activision Blizzard without some sort of divestiture.