Wall Street firm Goldman Sachs has included Nvidia Corp.’s stock in its conviction list, while another analyst predicts that the chipmaker may release its next-generation architecture, codenamed “Blackwell,” earlier than expected. Nvidia’s position as the leading supplier in the artificial intelligence (AI) industry has been a significant contributing factor to its success. The company’s stock has already experienced significant growth in 2023, with shares rising over 200%, while the S&P 500 and Nasdaq Composite indices have seen more modest gains.
Goldman Sachs analyst Toshiya Hari attributes Nvidia’s success to its dominance in the AI “gold rush.” The firm believes that other Wall Street analysts have underestimated the potential gross-margin uplift from an improving mix, particularly regarding data center growth and operating-expense leverage. Goldman Sachs has high expectations for Nvidia’s future performance and has added the stock to its conviction list.
Nvidia’s recent financial performance has exceeded market expectations. The company’s data-center sales surpassed Wall Street projections by over $2 billion, and its revenue forecast for the third quarter was more than $3 billion higher than expected. Additionally, Nvidia reported adjusted gross margins of 71.2%, compared to 45.9% the previous year. The company’s improved margins are expected to drive further buyback activities following its recently announced $25 billion authorization.
Analyst Atif Malik of Citi Research has also expressed optimism about Nvidia’s future. Malik believes that AI spending may prompt Nvidia to release its next-generation chip architecture, the B100 AI GPU, earlier than initially planned. According to Malik, the B100 GPU could be a significant game changer in the AI industry, driving up Nvidia’s average selling prices, sales, and margins. The company has a tradition of naming its architectures after computing pioneers, with the Blackwell architecture following this trend.
Typically, Nvidia releases its next-gen AI GPUs every two years in the second half of the year. However, Malik suggests that the B100 GPU could see an earlier launch, potentially in the first half of 2024. This accelerated timeline is based on increasing demand for AI GPUs and the entry of competing next-gen products into the market.
Investors are advised to pay attention to industry commentary, particularly from cloud data-center operators like Amazon, Microsoft, and Alphabet, to ascertain the sustainability of AI spending. The forthcoming third-quarter earnings report from Nvidia, expected in November, may shed more light on these developments.
Overall, Nvidia’s position in the AI industry and its strong financial performance make it an attractive stock for investors. With increasing demand for AI technologies and the potential for an early release of its next-generation chip architecture, Nvidia seems well-positioned for continued growth in the foreseeable future.