Nvidia Corp.’s developer conference this week promises to showcase the “arms race” that generative artificial intelligence has become, but the main event will be Tuesday’s keynote address, where the graphics-processing-unit maker traditionally announces new products and services.
On Monday, Nvidia NVDA, +0.68% kicked off its GTC developer conference, but Chief Executive Jensen Huang’s Tuesday keynote address will be about all the ways the company he founded will serve “this defining moment in AI.”
Huang has been championing AI and machine learning for years, but this year, the focus on AI/ML will be much more acute as models like OpenAI’s ChatGPT captivate the mainstream imagination.
Earlier in the month, Nvidia Chief Financial Officer Colette Kress told an investors conference that AI was at “an inflection point,” not only with the growing popularity of models such as ChatGPT, but also as more and more businesses face cost pressures, the apps are being looked upon — and marketed — as efficiency tools.
Citi Research analyst Atif Malik on Friday reiterated his buy of Nvidia and raised his price target on the stock to $305 from $245 ahead of GTC because of the “generative AI arms race” underway as companies like Alphabet Inc. GOOG, -0.52% GOOGL, -0.39% and Meta Platforms Inc. META, +1.12% vie for their own AI solutions
“Despite macro concerns, hyperscalers are prioritizing cloud capex spending on a broad set of generative AI/ML use cases,” Malik said. “We view Nvidia’s flagship GTC conference next week to be a key event to showcase the future of generative AI for the industry.”
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Just last week, OpenAI, backed by a multibillion-dollar investment from Microsoft Corp. MSFT, -2.58%, rolled out its newest, “safer” version of ChatGPT, GPT-4, and while Malik said it was “not perfect,” it is “surely impressive.”
The buzz behind AI couldn’t come at a better time for Nvidia, which is a major hardware supplier of graphics processing units to data centers like the ones used by Amazon.com Inc.’s AMZN, -1.25% AWS, Microsoft’s Azure, and Alphabet’s Google Cloud Platform.
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While Microsoft has thrown its lot behind ChatGPT, Google is looking to support its workplace and cloud platforms with new AI tools, and China-based Baidu Inc. BIDU, +2.27% recently unveiled its Ernie Bot. Meanwhile, AWS at its Innovate event last week said that AI models are growing at a rate of 10 times larger per year, and that requires a lot of graphics processing units, Nvidia’s core product.
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After the two-year-long semiconductor shortage triggered by the COVID-19 pandemic flipped to a chip glut in mid-2022, some analysts expect growth in the important data-center category to slow down considerably in 2023. Those same data centers run and teach AI models, and maintain much of the rest of our digital existence.
For instance, Citi’s Malik noted that Microsoft’s new AI virtual machine, ND H100 v5 VM, uses anywhere from eight to up to thousands of Nvidia H100 data-center units on demand, and that Microsoft reportedly has had to ration the ones they have to prioritize AI demand.
Meanwhile, Evercore ISI analyst C.J. Muse, who calls Nvidia his “top pick,” said GTC is “the greatest AI event of the year.”
“We believe Nvidia is uniquely positioned to win in this market, particularly given the impending Grace/Hopper combo with its purpose-built architecture for [large language models] (including Hopper’s transformer engine) and array of software offerings,” Muse said.
“From Nvidia’s perspective, democratization of AI remains king and we expect that to shine,” Muse said. “We expect the event to be well received by investors, reinforcing the long-thesis and NVDA’s work to catalyze the proliferation of AI.”
Muse said investors buy into the event, historically, in that the stock outperforms the S&P 500 index by an average of eight percentage points in the five days preceding the event over the past two years, with Nvidia stock performing inline during the event. Last week, Nvidia shares surged 12%, while the S&P 500 rose 1.4%, and on Monday, the S&P 500 SPX, +0.89% finished up 0.9%, while Nvidia shares gained 0.7%.
