The stock price of chipmaker Nvidia surged Tuesday, extending a months-long rally, following a "buy" recommendation from HSBC.
In a client note, HSBC Head of Technology Research Frank Lee said his company was "throwing in the towel" on a previous "reduce" recommendation for Nvidia.
"We were too focused on the slowdown in datacenters, but what really surprised us was its pricing power on AI chips," Lee wrote.
"In particular, we’re shocked by Nvidia’s pricing power on A.I. chips that we see driving earnings upside, higher valuation."
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Per Refinitiv data, Lee was the only one of nearly 50 analysts covering Nvidia to have a negative rating on the chipmaker. He’s now lifted his price target on Nvidia to $355 from $175.
With a more than 90% rally this year, Nvidia ranks among the S&P 500’s top-performing stocks. It has rebounded around 150% from its low in October, but shares remain down about 17% from record highs in November 2021.
Investors are widely betting that Nvidia will continue to be a major player in the emerging wave of A.I. computing. HSBC forecasts that NVIDIA will hold a 90% market share in the fiscal year 2024.
With a market capitalization of $687 billion, Nvidia has become the fifth most valuable company on Wall Street, trailing behind Google’s Alphabet, Amazon, and Microsoft.
The bulk of Nvidia’s gains has come in the past three months, as the public launch of the AI-powered chatbot called ChatGPT in late November sparked a new wave of enthusiasm for so-called generative AI, and how it could revolutionize services like internet search, product design, writing and programming.
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The new technology requires intense computing power in data centers, where Nvidia has already built up a large-and-growing business for its graphics processors and software designed for AI applications. The company made a slew of announcements Tuesday as part of its annual GTC developers conference that focused mostly on generative AI opportunities.
FOX Business’ Dan Gallagher and Reuters contributed to this report.
