Nvidia (NASDAQ:NVDA) has risen well above $1,000, although it may have taken longer than some market-watchers had expected. The Nvidia stock price has more than doubled on a year-to-date basis, increasing 132% in value. This builds on the stock’s rapid rise in 2023.
Enterprises have sought to leverage generative artificial intelligence to create efficiencies within their businesses since its world stage debut last year. Controlling some 80% of the AI chip market, Nvidia’s stock has plenty of steam left to increase even further.
AI Innovation and Nvidia Stock
A few days ago, Nvidia along with several of its chip marker competitors gave their respective keynotes at the Computex conference in Taiwan.
While we have already heard plenty of news about Nvidia’s Blackwell chips (B100 and B200) that are slated to come out later in 2024, CEO Jensen Huang unveiled the chip firm’s road map for other advanced chips that will be available in 2025 and 2026.
The “Blackwell Ultra” will launch with 12-Hi HBM3E compatibility, which in layman’s terms just means “really high memory bandwidth.”
Succeeding the Blackwell series of chips will be the Rubin and Rubin Ultra GPUs that will support next generation 8-Hi HBM4 and 12-Hi HBM4 memory chips that will double performance speeds.
Although many might not realize, hardware is just one facet of chipmaking. You need good software to make that hardware operate efficiently.
Nvidia’s CUDA software is another dimension of performance for these new GPUs. The chipmaker has worked to craft and hone this software over many years, ultimately putting it ahead of others attempting to compete in the market.
Competitors’ Woes Bode Well for NVDA
Competitors AMD (NASDAQ:AMD) and Intel (NASDAQ:INTC) were also present at the Computex conference and delivered their own compelling keynotes.
However, it was hard not to see that both chipmaking companies seriously lagged Nvidia. AMD’s Lisa Su’s announced the MI325X chip that will launch later in the year, but this series is chips is still behind the cutting-edge chips Nvidia will produce in 2024.
Similarly, Intel’s new Gaudi 3 chips will be able to run AI models 1.5x faster than Nvidia’s H100 chips but will likely not match the Blackwell chips in performance.
Unlike AMD, however, Intel continues to struggle with its Foundry (chip manufacturing) business, which has continued to churn out significant losses, keeping it behind contract chipmaker TSMC (NASDAQ:TSM) and, as a result, Nvidia stock.
Wall Street hasn’t sold out of the AI craze yet
Wall Street isn’t prepared to let go of the AI craze yet either. UBS analyst Timothy Arcuri maintained his firm’s “Buy” rating and increased their price target to $1,200/share.
He believes Nvidia’s outlook overall remains positive since demand for AI chips continues to outpace supply. With competitors slowly ramping up their development of AI chips, the pricing power in the burgeoning AI chip market will remain in Nvidia’s hands for the foreseeable future.
Bank of America is feeling optimistic as well. The banking firm increased their price target to $1,500/share, which is about 30% higher than where the stock traded as markets closed on Monday. Subsequent price upgrades from other Wall Street firms would not be surprising.
While the chip stock trades at 39.7x forward earnings, I believe investors will still be willing to pay the premium.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
