Plenty of financial traders and commentators have gone all-in on generative artificial intelligence (AI), but what about the hardware? Nvidia (NASDAQ:NVDA) is ahead of the curve, as usual, in advancing the technology tools needed to power the computers, phones, and other devices of today and tomorrow. So, even though it has already posted strong gains in 2023, I remain strongly bullish on NVDA stock.
You probably already know Nvidia as a manufacturer of graphics processing units (GPUs) for video game consoles. Rest assured, Nvidia will continue to generate revenue from this. Yet, even though the company could just coast on that revenue, Nvidia is getting a head start on the most impactful tech trend of 2023, generative AI.
Don't expect Nvidia to release a rival to OpenAI's ChatGPT chatbot anytime soon, though. Instead of competing with generative AI software developers, Nvidia is taking a different angle by doing what it does best -- anticipating and meeting the demands of end users and developers for next-generation, ultra-powerful technology components.
Generative AI is a Megatrend You Can't Afford to Ignore
There are trends, and then there are megatrends. Without a doubt, generative AI is a megatrend this year. As Morgan Stanley (NYSE:MS) analyst Joseph Moore put it, AI is "too much of a megatrend" for investors to ignore. This is the main reason why Nvidia needs to be on your watch list right now.
You might not realize it, but the generative AI software program you've probably tried out at some point is a major resource hog. Moore had a fancy way of explaining this: "The high capital intensity of these workloads, particularly on the training side, is now a major part of the calculus for the largest companies in technology." Nvidia is taking the lead here, as the company has "dominance in the training market that is likely to persist for several years," Moore said.
Nvidia flexed its muscles recently when it launched a half-dozen new RTX Ada Lovelace architecture GPUs designed specifically for laptops and desktops. Bob Pette, vice president of professional visualization at Nvidia, specifically linked these new products to the intense demands of AI and metaverse applications.
"Running data-intensive applications like generative AI and real-time digital twins in the metaverse requires advanced computing power," Pette observed. Thus, the new Nvidia RTX GPUs "provide the horsepower" that today's "creators, designers and engineers" need.
Clearly, Nvidia is jumping headfirst into the AI game with its new GPU architecture. Nvidia's new RTX desktop and laptop GPUs featuring Ada architecture technology provide "up to 2x faster AI training performance of the previous generation," as well as "new levels of realism and interactivity for real-time graphics by multiplying performance with AI."
Don't Over-Focus on the High Price of Nvidia Stock
As we'll see in a moment, analysts aren't expecting massive upside for NVDA stock. Perhaps that's because the shares have already gained a lot of value this year. Usually, I don't offer a strong recommendation for a stock that has gained more than 80% year-to-date. Yet, I encourage financial traders not to focus too much on the price of the stock, as it can easily run higher as Nvidia continues to ride the wave of AI fever in 2023.
If there were any doubts about Nvidia's firm focus on AI, CEO Jensen Huang put those doubts to rest at the recent GPU Technology Conference (GTC), which is like Woodstock for tech hardware fanatics. "Generative AI’s incredible potential is inspiring virtually every industry to reimagine its business strategies and the technology required to achieve them," Huang asserted during his keynote address at the conference.
At the same conference, Huang touted Nvidia's DGX supercomputers as "modern AI factories." If anyone is skeptical about this claim, they should note that Oracle (NASDAQ:ORCL), Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), and Meta Platforms (NASDAQ:META) have all partnered with Nvidia in one way or another to deploy DGX H100 AI computer system technology.
Are Oracle, Amazon, Microsoft, and Meta Platforms "wrong" in partnering with Nvidia to power the next generation of AI applications? That is not likely, so you might want to get on the right side of the trend and the right side of the trade.
Is NVDA Stock a Buy, According to Analysts?
Turning to Wall Street, NVDA is a Moderate Buy, based on 25 Buys, seven Holds, and two Sell ratings. The average Nvidia stock price target is $273.09, implying 2.6% upside potential.
Conclusion: Should You Consider Nvidia Stock?
Far be it from me to say that price doesn't matter. Stock prices certainly do matter, but in the case of NVDA stock, there are reasons to believe that it can continue to climb higher throughout the year.
Nvidia is going all-in on generative AI and AI in general. Tech-sector giants trust Nvidia to provide hardware that can fulfill the demands of AI applications. Moreover, the company continues to upgrade its already best-in-class GPUs. Therefore, you don't have to get hung up on whether NVDA stock is "too high" because its momentum can carry it higher.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.