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The atmosphere was electric as NVIDIA's CEO Jensen Huang took to the stage this week during CES, a prominent technology showcaseHis keynote was anticipated to deliver groundbreaking insights into the future of computingYet, contrary to expectations, the stock market reacted unfavorablyFollowing Huang’s speech, NVIDIA's shares plummeted over 6%, marking the worst single-day performance the company had seen in four monthsInvestors expressed disappointment, feeling that Huang’s presentation lacked substantive information, particularly concerning the data center business—an area of growing interest for the market—that did not receive any substantial updates.
Nevertheless, amidst the turmoil, Wall Street analysts were more optimistic post-eventOn January 7, they attended a Q&A session hosted by NVIDIA during CES, which led to a flurry of reports conveying confidence in the company’s future
Huang and CFO Colette Kress fielded a myriad of inquiries, highlighting several important points that investors would do well to consider.
NVIDIA unveiled its latest AI supercomputer initiative, dubbed Project Digits, which serves as a developer-oriented workstation akin to a mini DGXThis product is integrated with the cutting-edge GB10 Grace Blackwell superchips, underscoring NVIDIA’s commitment to leading in the AI domainThey further emphasized that accelerated computing is where the future lies, advocating that their GPU platforms have distinct competitive advantages over traditional ASIC (Application Specific Integrated Circuit) solutions.
Huang conveyed that NVIDIA is still in its early growth phase; the potential of machine learning stands to transform industry norms, paving the way for accelerated computing to supplant general-purpose computingAnalysts point out that there exists a staggering $1 trillion in general computing installations that are on the verge of needing upgrades in the coming years.
The management team anticipates that revenue from the Blackwell series chips will exceed previous forecasts well into the first quarter of 2025, with combined revenues from both Hopper and Blackwell series products also expected to rise during that quarter
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They attributed supply chain delays more to imbalances in market demand and system complexities rather than disruptions in supply itselfNonetheless, the development and production of Blackwell systems continue to progress as planned.
UBS, one of the notable investment firms, suggested that the launch of the Digits product significantly strengthens NVIDIA’s moat in the AI sectorThey projected revenues could skyrocket to $133.2 billion by the fiscal year 2025, expressing optimism about NVIDIA’s upcoming performance in the fourth quarter of FY2025 and the first quarter of FY2026, estimating a shipping volume for Blackwell of around $14 billion during that timeframe.
Citi also weighed in with a “Buy” rating for NVIDIA, highlighting the sustainability of its growth supported by four key trends: a shift from traditional computing to accelerated computing, the pivotal role of AI as a new layer in computing, an escalating demand for AI factories, and how AI is augmenting corporate productivity
These factors collectively paint a picture of a vigorous and resilient growth trajectory for the company.
Meanwhile, JPMorgan echoed similar sentiments, projecting substantial growth in NVIDIA's data center revenue through 2025, propelled primarily by the increased capacity and market demand for Blackwell productsDespite this optimistic outlook, they cautioned that even in 2025, supply and demand dynamics could remain tight in various domains including advanced packaging technology and networking equipment.
UBS maintained a robust target price for NVIDIA at $185, markedly above its current share price of $138. They forecast revenue for FY2025 at an impressive $133.2 billion, with expectations of pre-tax earnings of around $88.8 billion and net income reaching approximately $75.8 billionThis projected earnings per share would represent a substantial uplift from the $1.30 figure anticipated for FY2024.
Drawing from the significance of NVIDIA's product offerings, the recent CES saw the launch of DIGITS, NVIDIA’s first desktop product integrated with the groundbreaking GB10 Grace Blackwell superchip
This unit combines Arm architecture-based CPU and GPU capabilities, delivering AI computational power reaching up to 1 petaflop—an astounding capacity for executing floating point operations.
The discussions surrounding the balance between commercial GPUs and customized ASICs merely reinforce the fact that accelerated computing is on the riseNVIDIA asserts that their commercial GPU solutions deliver unparalleled platform advantages, placing them ahead of ASIC counterpartsThey argue that artificial intelligence will soon become part of national infrastructure, emphasizing that accelerated computing is an undeniable trend for the future.
NVIDIA is clear that AI development is still nascent, with exponential growth expected as accelerated computing begins to take the place of traditional computing over the next few yearsIn this regard, they estimate that approximately $1 trillion worth of general computing installations globally will need to be upgraded, creating a massive opportunity for growth.
JPMorgan particularly highlighted that the evolution and complexity of training models, alongside the demands of enhanced computational testing time, will persistently fuel the demand for GPU computational capacity
With the growing importance of inference in AI applications, the computational requirements for testing time become paramount, fundamentally positioning NVIDIA’s solutions as indispensable amidst the evolving landscape.
As 2025 approaches, NVIDIA’s trajectory appears promising, bolstered by the booming market for AI and accelerated computing, which is projected to dominate expenditures for the foreseeable futureThe company is well poised not merely to participate in the burgeoning data center infrastructure valued at $1 trillion but to claim a significant share of this lucrative market as it adapts to trends in AI and accelerated solutions.
For now, the question remains: will NVIDIA be able to sustain this momentum in the face of market volatility? Investors and analysts alike are keenly observing how these formidable developments in AI technology will unfold, defining the technology landscape for years to come.