What happened
Shares of Nvidia (NVDA 3.34%) were rising 4.6% at 10:34 a.m. ET Tuesday morning after a Bank of America analyst raised his price target on the chipmaker.
Vivek Arya told investors in a research note he finds Nvidia to be "uniquely" positioned to capitalize on what he calls an "artificial intelligence arms race." He raised his target price on the chipmaker to $255 per share, 17% above yesterday's closing price.
Image source: Getty Images.
So what
While artificial intelligence has been brewing as a significant area of investment for years, it really burst on the scene this year with the successful debut of OpenAI's ChatGPT chatbox. Stocks with even the most casual connection to AI have received a boost on the hype surrounding this Microsoft-backed chatbox.
Arya, however, foresees Nvidia enjoying a leadership position in the land grab that will be developing in the space.
"We have constructed a new model that predicts Nvidia's sales/pro forma EPS could grow at a 25%/34% compounded annual growth rate to >$14/sh by CY27E as adoption of generative AI quadruples the addressable oppty. for AI accelerators," Arya said in the client note.
Nvidia, of course, is waist-deep into AI and has developed an expansive ecosystem of applications accelerated by its AI solutions. Its compute & networking business segment that houses its AI business has become its biggest revenue driver, and AI was the most talked-about subject on its last earnings call.
Now what
Nvidia's stock has doubled in value from the low point it hit last October, when consumer demand for its chips due to the onset of the so-called crypto winter set in. Artificial intelligence has the opportunity to whip up chip demand into a frenzy again, and Nvidia's best-in-class technology is what has Wall Street seeing further gains coming.
