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Nvidia gains big from ChatGPT hype, Wall Street predicts

In the weeks since the ChatGPT artificial intelligence tool took the world by storm, Nvidia Corp. emerged as Wall Street’s preferred choice for traders looking to capitalize on its potential.

In the weeks since the ChatGPT artificial intelligence tool took the world by storm, Nvidia Corp. emerged as Wall Street’s preferred choice for traders looking to capitalize on its potential.

The chipmaker’s stock is up 29% since the start of the year, making it one of the best-performing companies in the S&P 500 index. Contributing to the profit was the hype surrounding the chatbot released by OpenAI late last year that has shown an uncanny ability to mimic human writing.

The rationale is simple: Nvidia dominates the market for graphics chips designed for complex computing tasks needed to power AI applications. The more people use ChatGPT, the more computing power its owner OpenAI needs to generate answers to the millions of questions from lazy students with essay assignments or struggling songwriters.

On Monday, Microsoft Corp. announced that it made an investment in OpenAI that is said to total $10 billion over several years. The funding is needed by OpenAI to ramp up computing power and will likely only bolster demand for Nvidia chips. Shares of Nvidia rose as much as 6.5%.

Last week, Citigroup Inc. that rapid growth in ChatGPT usage could result in Nvidia revenue of $3 billion to $11 billion over 12 months. Analyst Atif Malik acknowledged that it is difficult to model growth for such an emerging service, but based his values ​​on forecasts for the number of words generated by ChatGPT and the revenue per word for Nvidia.

“We believe Nvidia has a potentially meaningful compute demand driver in ChatGPT,” Malik wrote in a research note last week.

Bank of America Corp. said Nvidia is at the forefront of the companies that can benefit from the growth in so-called generative AI. Wells Fargo & Co. said Nvidia’s upcoming chips are well positioned to take advantage of the greater computing needs demanded by AI models such as ChatGPT.

Of course, it’s possible that the service is just the latest fad sweeping through the tech industry, only to fizzle out like orders from cryptocurrency miners, which have surged and crashed multiple times over the past few years. Nvidia investors, and those who have poured money into other semiconductor makers at the end of 2021, know that the promise of continuous growth can be illusory. After increasing sales by more than 50% in each of the past two years, revenue in fiscal 2023 is expected to remain flat at approximately $27 billion.

Nvidia shares have lost nearly half of their value since peaking in November 2021. Despite the sell-off, the stock remains one of the most expensive in the Nasdaq 100, with a price about 41 times expected earnings for the next 12 months, well above its average over the past decade.

Analysts see the stock up 13% over the next 12 months to $200.68, based on the average price target.

Whether or not ChatGPT itself leads to higher orders for Nvidia, Ivana Delevska, chief investment officer at SPEAR Invest, believes its success will spur the development of more tools that require more computing power and thus more chips.

“People will look at how popular it has become and can see how this stuff is going to be a big deal,” said Delevska, who counts Nvidia among the company’s top companies. “That could mean more and more interest in this space, which will lead to a ton more investment from all kinds of companies looking to catch up.”


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