Nvidia's stock could rise fivefold in 10 years on A.I. trend, says fund manager

Published Wed, May 17 20237:19 PM EDT

Nvidia , the company behind the most powerful chips used to enable artificial intelligence, has the potential to increase its stock value by five times within the next 10 years, according to investor and fund manager Philip Ripman. Shares of the Silicon Valley-headquartered firm have doubled since the start of this year over positive investor sentiment toward A.I. since ChatGPT was unveiled. Despite the gains, the stock is still down by 12% from its all-time high on Nov. 29, 2021, according to FactSet data. In addition, the stock halved in 2022. NVDA 5Y mountain Investor enthusiasm for Nvidia is centered around its business model of selling high-performance graphics processing units (GPUs) essential for running the complex algorithms behind artificial intelligence technologies. As A.I. has become increasingly important across industries, demand for GPUs has surged. According to Ripman, who has managed the $1 billion Norwegian Storebrand Global Solutions sustainable fund since 2015, the A.I.-led trend driving the market higher is still developing as investors are only beginning to understand what automation can do and how it will impact various industries. The fund manager said A.I. companies using Nvidia's chips could grow and disrupt other sectors, such as energy production, digital and financial services. Ripman also pointed toward Nvidia's initiative, the Cambridge-1 supercomputer used by pharma companies for research, as an example of the company's links to the health care sector. "I think the opportunities are really limitless and time will tell if they're able to capitalize on some of these opportunities," Ripman told CNBC's Pro Talks. "But I think Nvidia has a good track record of demonstrating that they can." Ripman added that he could see a scenario where Nvidia could grow five-fold due to the market size and demand. "What this really comes down to is, I think we're just scraping the surface really of what A.I. can be," he added. Nvidia makes up more than 4% of Ripman's fund, or approximately $40 million worth, and is among its top five holdings as of Apr. 30. The size of the A.I. market has also attracted interest from competitors such as AMD, Intel, Amazon, and Google. But according to Bank of America analysts, Nvidia has built a moat around its business that is unlikely to be disrupted soon. "Competitors are not new, but surging interest in generative A.I. and scarcity of certain NVDA products (H100) has raised the intensity of media noise," said BofA analyst Vivek Arya in a note to clients on May 10. "We remind investors that success in A.I. requires full-stack computing and scale/experience across silicon, software, application libraries, developers plus enterprise and public cloud incumbency." The upside potential at Nvidia, however, comes alongside certain risks, Ripman acknowledged. The fund manager pointed out that geopolitical tensions between China and Taiwan have caused some investors like Warren Buffett to pull back investments from Taiwan Semiconductor Manufacturing Company (TSMC) due to concerns over instability. TSMC manufactures the chips in Taiwan that Nvidia designs in the United States.