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 the stock to $320 from $200. Nvidia shares traded around $182 on 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 at $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.
Read more about Nvidia’s stock moves and today’s market action
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.
The Artificial Intelligence Infrastructure Partnership (AIP), an investor consortium that includes Nvidia, BlackRock (BLK), Microsoft (MSFT), UAE-based MGX, and Elon Musk’s xAI, said Wednesday that it will acquire 100% of the equity in Aligned Data Centers, a private data center company. 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 the powerful computing hardware, including Nvidia’s chips, necessary to train and run companies’ artificial intelligence models.
AIP’s investment is the latest in a tangled web of AI deals involving vendors of AI infrastructure, such as Nvidia, investing in their own customers, and vice versa — a circular dynamic that analysts warn is contributing to a stock market bubble.
Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.
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