Nvidia stock rises on HSBC upgrade as analyst sees ‘continuous earnings growth’
Nvidia (NVDA) stock rose more than 2% in early trading on Monday as HSBC (HSBC) upgraded shares to Buy from Hold on resilient earnings growth.
HSBC analyst Frank Lee said in a research note that he expects the market for Nvidia’s AI chips to keep growing beyond its Big Tech customers, pointing to OpenAI-backed Stargate projects in the US and abroad as well as OpenAI’s (OPAI.PVT) recent deal with Nvidia, which he sees cumulatively creating up to $400 billion in revenue for the chipmaker.
Lee said that the emergence of new business for Nvidia from “emerging” players like OpenAI and CoreWeave (CRWV) as well as sovereign AI infrastructure projects will boost Nvidia’s earnings: “[W]e expect AI GPU TAM [total addressable market] to keep increasing beyond hyperscalers, leading to continuous earnings growth.” GPUs refer to Nvidia’s graphics processing units, or AI chips.
Lee also raised his price target on shares to $320 from $200. Nvidia shares traded around $182 Wednesday morning.
To be sure, some analysts worry whether OpenAI can fulfill its commitments that are fueling optimism for future demand for Nvidia chips. Citi (C) analysts estimate OpenAI’s AI infrastructure spending linked to its latest deals could hit $1.3 trillion by 2030, while projecting the AI chatbot maker’s revenue will rise to a fraction of that cost, $163 billion.
There’s also a concern that the US won’t be able to scale up its energy infrastructure in time to meet the power needs of the most recently announced AI projects.
Nvidia’s Wednesday gain helped reverse losses from the prior day, when the shares fell more than 4% as tech led stocks down amid an escalating trade dispute between the US and China.
The market action came amid news of a massive AI infrastructure deal involving Nvidia.
An investor consortium called the Artificial Intelligence Infrastructure Partnership (AIP) — including Nvidia, BlackRock (BLK), Microsoft (MSFT), UAE-based MGX, and Elon Musk’s xAI — said Wednesday that it will acquire 100% of the equity in a private data center company called Aligned Data Centers. The transaction would value Aligned Data Centers at roughly $40 billion, AIP said.
Texas-based Aligned Data Centers is owned by Macquarie Asset Management and has more than 50 data center campuses across the US and South America.
Big Tech has been spending at a torrid pace to build and lease AI data centers with powerful computing hardware, including Nvidia’s chips, necessary to train and run companies’ artificial intelligence models.
