Morgan Stanley Believes Nvidia’s AI Spending Trend to Continue

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Morgan Stanley is confident that Nvidia’s strong performance in the realm of artificial intelligence (AI) will persist through the second half of this year.

The firm’s technology analysts have reiterated their Overweight rating for Nvidia shares (ticker: NVDA). According to a spokesperson from Morgan Stanley, the chip maker still has a price target of $500.

The report states, “Nvidia remains a Top Pick, reflecting significant potential for near term upside — as the only company likely beating and raising due to AI in CY23.” Since Nvidia released its earnings in May, “our industry contacts are reporting daily new orders from customers that were not previously considered major customers.”

In early trading on Monday, Nvidia stock has experienced a slight decline of 0.7%, currently priced at $421.88.

The analyst team is becoming more optimistic about the demand for AI applications. An estimated 55% of Nvidia’s revenue is derived from graphics processing unit (GPU) chips manufactured for AI purposes, compared to a low single-digit percentage for their main competitor, Advanced Micro Devices (AMD).

The Morgan Stanley team asserts that Nvidia has a superior competitive position compared to other companies in the same market.

Nvidia’s products also have significant exposure to generative AI, which has seen a surge in popularity this year. This technology uses a brute-force approach to analyze text, images, and videos in order to generate content. The release of OpenAI’s ChatGPT has further fueled interest in generative AI.

The release of ChatGPT and its subsequent success have sparked an increased demand for generative AI products that can train on text, images, and videos to create content. The chatbot utilizes a language model to generate humanlike responses based on its analysis of written content from the internet or other sources.

On Wall Street, there is generally a positive outlook on Nvidia stock. According to FactSet, 86% of analysts covering the company have Buy ratings or their equivalent, while 12% have Hold ratings.

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