Nvidia Corp. Shares Rally Amid AI Expectations

Nvidia Corp. shares saw a significant boost on Monday after one analyst declared it his "top pick" among companies set to benefit from artificial intelligence. Despite a recent selloff, the analyst believes it presents a great buying opportunity.

Morgan Stanley analyst Joseph Moore, who holds an overweight rating on Nvidia and has set a $500 price target, remains highly favorable towards the stock as the company prepares to release its earnings report on August 23.

With year-to-date gains of over 200%, Nvidia shares reached an intraday high of $432.12 on Monday, marking a 5% increase. While the stock has experienced a slight decline in recent weeks, with a decrease of 13% after hitting an all-time closing high of $474.94 in July, it remains up by approximately 195%.

Moore stated, "We believe the recent selloff provides an excellent entry point. Despite supply constraints, we anticipate a significant beat and raise quarter, as well as strong visibility for the next 3-4 quarters."

He further highlighted the "fairly exceptional supply-demand imbalance" that is expected to persist for several quarters, emphasizing how unusual this situation is. Last earnings report, Nvidia's revenue forecast experienced the largest single increase in one quarter in semiconductor history, which Moore sees as having the potential for even more positive outlook. However, with less than half of the current demand being met, the prospect of a further data-center ramp is likely once supply improves.

Moore predicts that Nvidia will continue to thrive based on its strong position within the AI industry. In conclusion, he expects future success for the company and recommends it as an attractive investment option.

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Nvidia's Record-Breaking Revenue Forecast

In the previous quarter, Nvidia projected its second-quarter revenue to be between $10.78 billion and $11.22 billion, which would surpass its previous record of $8.29 billion achieved in the first quarter of the fiscal year, a year ago.

Initially, analysts estimated a revenue of $7.17 billion in late May, but later revised their forecasts to a consensus of $11.12 billion.

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However, critics have raised concerns about the hype surrounding AI and the inflated estimates and projections. One such critic is psychologist and AI researcher Gary Marcus. In a recent blog post, Marcus likened the hype around generative AI to the exaggerated claims about the room-temperature superconductor LK-99, which were later debunked.

Marcus emphasized that while the valuations anticipate trillion-dollar markets for generative AI, the actual current revenues are believed to be in the hundreds of millions. While there is potential for significant growth, Marcus cautioned against assuming it as a certainty.

Nvidia's CEO Optimistic about AI Growth

Amidst the debates, it is worth noting that Nvidia's closest competitor in the AI chip space, Advanced Micro Devices Inc. (AMD), also experienced a rise in shares by 2.5% in recent activity. This development coincided with a 1.8% gain in the PHLX Semiconductor Index (SOX), a 0.3% rise in the S&P 500 index (SPX), and a 0.6% increase in the tech-heavy Nasdaq Composite index (COMP).

Despite uncertainties, Nvidia's CEO remains optimistic about the future growth of AI revenue, expecting it to transition from "tiny, tiny, tiny" numbers to a substantial figure over the next twelve months.