Here’s what Wall Street says about Nvidia ahead of ‘AI Woodstock’

Kicking off the event, Nvidia’s (NVDA) CEO Jensen Huang is expected to deliver a keynote at the company’s GPU Tech Conference, or GTC, taking place from March 18-21, the first in-person iteration of the meeting since 2019. Calling it the “AI Woodstock,” BofA says it expects GTC to showcase a rising impact of Generative AI, pipeline update, and a monetization update across recurring software and services.

Meanwhile, Melius Research argued that the most important thing is “coming away with a feeling that Nvidia can continue to drive use cases for Generative AI.” One and a half years into this AI boom, Nvidia is expected to reinforce its position as the undisputed leader in guiding the market on an “open-ended” journey, the firm added.

AI WOODSTOCK: Earlier this week, BofA raised the firm’s price target on Nvidia to $1,100 from $925, while keeping a Buy rating on the shares ahead of its GPU Tech Conference that begins on March 18. The firm expects GTC, which it calls “AI Woodstock,” to showcase a rising impact of genAI, omniverse/digital twins across a wide range of end-markets; an opportunity to re-architect nearly $1T-$2T of global computing infrastructure with accelerators; a pipeline update across accelerators, Ethernet switches, DPU, and edge AI; and a monetization update across recurring software and services.

BofA acknowledges that bears may be cautious on Nvidia’s over 85% surge year-to-date. Still its recent ownership analysis suggests that while Nvidia is broadly owned, relative weighting is below large cap infotech peers despite nearly 9-times faster growth potential.

GENERATIVE AI FUTURE: The most important week in AI begins March 18th in San Jose, at Nvidia’s GTC, Melius Research says, adding that the in-person gathering is not only important for Nvidia, but for the entire AI universe riding its coattails in a $1T-plus TAM. The firm believes that the most important thing is “coming away with a feeling that Nvidia can continue to drive use cases for Generative AI,” leveraging a full-stack approach and partnerships to fuel real apps for clouds, enterprises and consumers. One and a half years into this AI boom, Nvidia is expected to reinforce its position as the undisputed leader in guiding the market on an “open-ended” journey, Melius adds.

Even with its rapid ascent on the back of chips like the A100 and H100, the firm notes Nvidia is about to embark on a new product cycle that accelerates AI adoption once again. The company is already seeing strong demand for the new H200 that should help contribute to sequential growth through the year-end. Melius is also excited about the prospects for the B100 later in 2024 and the X100 in 2025. Demand indications for these products at GTC should help fuel confidence for strong double-digit growth in 2025, helping support Nvidia’s multiple, says the firm.

While Nvidia should remain the gold standard for training large language models, investors are likely to continue to focus on comments around inferencing demand, Melius contends. There is a perception that Nvidia is vulnerable to competition in this category, a TAM that should be bigger than the training market as more models move into production. Nvidia recently surprised investors with the disclosure that 40% of its Data Center revenue in 2023 was inferencing-related already, bolstering confidence. The surge in inferencing helps lift the firm’s entire space and drive a “halo effect.”

Lastly, Melius says it also wants to learn more about the expansion of Nvidia’s AI Enterprise Software offering that helps enterprises adopt Generative AI and runs in DGX Cloud. The firm projects that Nvidia’s software/services business could approach $6B in 3 years.

PRICE ACTION: In Friday afternoon trading ahead of the close, shares of Nvidia are nearly flat at $878.25.