Nvidia stock hits best winning streak since 2016 as AI advantage called ‘insurmountable’

Nvidia stock hits best winning streak since 2016 as AI advantage called ‘insurmountable’

THE RATINGS GAME

CORRECTION:  A previous version of this article had an incorrect date for Nvidia’s last eight-day winning streak with a better percentage gain. The article has been updated.

Nvidia Corp. finds itself uniquely positioned to take advantage of what’s being called an artificial-intelligence revolution, analysts contend, as the chip maker’s stock hit its best winning streak since 2016 on Wednesday.

At Nvidia’s annual GTC developers conference, the gaming-chip specialist rolled out a slew of hardware and software products that are geared to be the picks and shovels of the current AI gold rush, and formed a fresh partnership with Alphabet Inc.’s Google Cloud Platform.

Nvidia’s stock closed up 1% Wednesday for its eighth consecutive positive session, with a gain of 15.3% over that time, making it the longest winning streak for Nvidia shares since July 2020, and the stock’s best eight-day winning streak since the eight days ended Dec. 27, 2016, during which it gained 21.6%, according to Dow Jones Market Data.

Wall Street analysts reported Wednesday that Nvidia’s graphics-processing units are seeing widespread adoption by cloud-service providers as the company’s software offerings are creating a wider moat. Bernstein analyst Stacy Rasgon, with an outperform rating on the stock, said that Nvidia is in a unique place to benefit from the death, or slowing, of Moore’s Law “as they deliver both the hardware and software environments needed to drive the data-center cost and power efficiencies that are increasingly becoming unobtainable using only CPUs.”

Read: Nvidia launches new AI platforms, with Google Cloud as an early adopter

Rasgon added that Nvidia’s advantage from its software ecosystem “appears to be getting ever close to insurmountable.”

“To be honest, we struggle to see how anyone else can compete with Nvidia’s ecosystem, even if they could manage to come closer on the hardware side,” Rasgon said.

On Tuesday, Nvidia founder and Chief Executive Jensen Huang announced a slew of products and services targeted at expanding AI development, including new chips and platforms specifically targeted at generative AI applications as well as AI video and image creation. On Wednesday, Huang said in a press conference that he expects the tiny amount of revenue the company currently gets from generative AI to become “quite large” over the next 12 months.

For more: How Nvidia plans to fuel the AI surge and a new era of chipmaking

Citi Research analyst Atif Malik, who has a buy rating and raised his price target to $310, echoed something Huang said this week, calling the Google partnership “a big deal.” He noted that Google chose Nvidia’s L4 inference chips over its own TPU5 custom silicon, “which opens up a bigger compute [total addressable market] for Nvidia.”

Malik also noted that “enterprises are reaching out as some are looking for gen AI solutions and large-language-models expertise,” and that “in terms of margins,” the company is “negotiating with [cloud-service providers] to upsell on top of existing infrastructure and/or full stack deals.”

B of A Securities analyst Vivek Arya, who has a buy rating on the stock, said Nvidia platforms are increasingly in demand as AI becomes more ubiquitous in everyone’s daily lives.

“Nvidia’s dominance in the nascent generative AI/large language model (LLM) market…could reshape the existing tech industry and usher in disruptive startups,” Arya said.

Nvidia’s “combination of scale and vision to invest in a full-stack, turnkey (hardware, software, systems, services, developers) model could accelerate the adoption of LLMs by enterprises in almost every end-market,” Arya said. “This view is echoed by largest hyperscalers/tech companies incl. Microsoft (Azure), Amazon (AWS), Google (GCP), Oracle (OCI) and others who see a partnership with Nvidia as a more effective view to rollout LLM-based applications.”

Read: Nvidia CEO expects AI revenue to grow from ‘tiny, tiny, tiny’ to ‘quite large’ in the next 12 months

Google launched a new AI product, Bard, on Tuesday, one of the many new generative AI products that are looking to cash in after OpenAI’s ChatGPT — backed by a multibillion-dollar investment from Microsoft Corp. — received a lot of buzz. Also, Adobe Inc. at its own event Tuesday, announced an AI product named Firefly, a “co-pilot” technology aimed at helping create content within its own products that was also highlighted by Nvidia.

At Wednesday’s close, Nvidia shares had gained 2.9% for the week and 81% year to date, while the S&P 500 index had advanced 0.5% for the week and 2.5% for the year, and the tech-heavy Nasdaq Composite Index rose 0.3% and 11.5%, respectively.

Of the 46 analysts who cover Nvidia, 32 have buy-grade ratings, 13 have hold ratings, and one has a sell rating, along with an average price target of $261.69, according to FactSet data.