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Data-center revenue for Nvidia could be much higher than Wall Street expects, according to Bernstein.
Dreamstime
Bernstein is more optimistic about the potential for Nvidia to beat its own financial forecasts given the latest word from major cloud-computing vendors about their plans for spending on artificial intelligence.
On Monday, the firm’s team of technology analysts played down the short-term and medium-term risks that too much AI infrastructure could be built, leading to a boom, and then a bust, in demand for
Nvidia
‘s (ticker: NVDA) semiconductors.
“Clearly, customer demand [for Nvidia AI chips] is off the charts at the moment,” they said.
Bernstein rates Nvidia stock at Outperform with a target of $475 for the price. The stock was roughly unchanged at $468 in early trading Monday.
The analyst team aggregated their estimates of increases in AI-chip spending from
Microsoft
,
Meta Platforms
,
Bytedance, and Google and found the four companies alone were enough for Nvidia to meet its guidance for the current quarter. Meanwhile, they expect other large technology companies and AI start-ups to invest aggressively in Nvidia’s AI semiconductors.
“Customer commentary uniformly points to demand greatly exceeding supply, and an analysis of anticipated wafer starts points to potentially even higher growth,” they wrote.
Bernstein says the current limitation on Nvidia’s revenue is advanced chip- packaging capacity at semiconductor foundries. As packaging capacity expands next year, Nvidia will have the potential to generate $75 billion to $90 billion in data-center AI revenue for 2024, versus the $42 billion consensus call among Wall Street analysts, the analysts say.
Nvidia dominates the market for chips used for AI applications, so it stands to benefit from generative AI. That is the technology behind chatbots such as OpenAI’s ChatGPT, which unleashed a wave of excitement after it was released late last year. The technology ingests text, images, and videos and then uses the patterns it finds to create content.
We “can see Nvidia’s numbers sustaining, and likely heading higher, for quite some time to come, at least the next 12-18 months,” the Bernstein team said.
Write to Tae Kim at tae.kim@barrons.com