Nvidia's Core Approach Is Enabling Broader AI Industry: Analyst

Nvidia (NASDAQ:NVDA) remains optimistic about the growth of its artificial intelligence infrastructure, with significant demand expected from hyperscalers, Neo-Clouds, and enterprises, as the company positions itself to dominate the AI accelerator market in the long term.

Nvidia’s management emphasized its bullish outlook on AI, citing a strategic partnership with OpenAI and robust demand for AI token-driven platforms, as the company anticipates $2 trillion in AI spending from hyperscalers alone.

Cantor Fitzgerald analyst C.J. Muse maintained an Overweight rating for Nvidia and raised the price forecast from $240 to $300.

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During investor meetings in New York, Nvidia management, including CEO Jensen Huang and CFO Colette Kress, provided insights into the company’s bullish outlook on AI infrastructure growth, Muse told.

As the AI build-out continues, Nvidia sees significant demand from hyperscalers, Neo-Clouds, enterprises, and physical AI applications, as per the analyst.

While some might question if AI is in a bubble, Nvidia believes the growth cycle is only beginning, especially with the U.S. government investing heavily in AI technologies, he said.

A significant focus of Nvidia’s discussions was their new partnership with OpenAI, which aims to make OpenAI a self-hosted hyperscaler, Muse told.

This shift is designed to reduce margin stacking from server providers, allowing the cost differential between Nvidia chips and Application-Specific Integrated Circuits (or a custom-designed computer chip) to be approximately 15%, according to the analyst.

With Extreme Co-Design happening annually, Nvidia is optimizing its AI infrastructure, positioning itself to dominate at least 75% of the AI accelerator market in the long term, he noted.

Based on the current trajectory, Nvidia’s earnings per share (EPS) could reach $8 by 2026, with a potential for $11 by 2027, according to Muse’s projection.

Nvidia has also noted that AI token demand has increased significantly over the past 12-16 weeks, driven by advancements in time-based reasoning and multimodal inputs, particularly with video, the analyst said.

This demand is linked to large investments and platforms like OpenAI generating significant profits per token, he said.

Nvidia is positioning itself to benefit from $2 trillion in spending by hyperscalers alone, emphasizing that this is not a bubble, but a long-term growth cycle, Muse told.

In the coming decade, Nvidia anticipates significant market growth, aiming for a $3-4 trillion AI infrastructure market by 2030, the analyst pointed out.

The company’s AI platform strategy, which focuses on enabling the broader industry, remains at the core of its approach, he said.

Nvidia’s involvement in multiple AI companies and its proprietary CUDA-X technology gives it a sustainable competitive edge, Muse told.

While ASIC competition may arise, particularly from Google’s TPUs, Nvidia continues to see its platform as the clear leader in the market, with substantial R&D investments and regular product innovations, Muse told.

In the Chinese market, Nvidia remains cautious but sees the value in standardizing globally, arguing that the U.S. should adopt Nvidia’s platform over Huawei’s in the race for global AI dominance, according to the analyst.

Muse projected third-quarter revenue of $54 billion and EPS of $1.23.

NVDA Price Action: NVIDIA shares were up 1.98% at $192.85 at the time of publication on Thursday. The stock is trading at a new 52-week high, according to Benzinga Pro data.

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