Nvidia chips are the favored choice for training artificial-intelligence models.
Nvidia was edging lower in premarket trading Tuesday as the market looks to gauge the size of the chip maker’s opportunity in artificial intelligence. One Wall Street analyst argued it is still underestimated.
Nvidia shares slipped 0.1% to $144.61 in premarket trading. The stock rose 1.9% on Monday.
After a 25% gain over the past three months, investors are looking for further evidence of Nvidia’s growth potential. CEO Jensen Huang has forecast spending on AI-enabled data centers will double to $2 trillion over the next four to five years.
“What share will Nvidia get of a $2T+ annual TAM [total addressable market]? Why is 40% not possible as it becomes an infrastructure company?,” wrote Melius Research analyst Ben Reitzes in a research note.
That would suggest a revenue opportunity of around $800 billion. By comparison, Nvidia’s data center revenue for its current fiscal year has been forecast by analysts to be just short of $180 billion.
Those figures don’t represent a firm revenue forecast from the Melius analyst, who currently projects Nvidia’s data-center revenue will grow to $275 billion in fiscal 2028. However, Reitzes did question whether Nvidia’s long-term growth prospects are still underappreciated.
Reitzes has a Buy rating and $205 target price on Nvidia stock.
Among other chip makers, Advanced Micro Devices was down slightly and Broadcom was falling 0.9% in premarket trading.
Write to Adam Clark at adam.clark@barrons.com