Goldman Sachs raises Nvidia price target, says chipmaker is entering a new growth phase

Published Mon, Jul 10 20236:05 AM EDTUpdated Mon, Jul 10 202310:37 AM EDT

While a boom in artificial intelligence demand lifted shares of Nvidia nearly 191% this year, Goldman Sachs anticipates even more gains for the chipmaker as it enters a new growth period. Analyst Toshiya Hari reiterated his buy rating on the chipmaker while upping his price target to $495 from $440 a share on the "key enabler of traditional AI." He cited a "significant runway" for the chipmaker's data center business as new AI models require stronger compute and training. "Supported by its competitive moat founded on consistent investments in hardware and software, Nvidia has been a key enabler and beneficiary of traditional AI for nearly a decade," Hari said in a Sunday note. "The recent step-function increase in the company's Data Center revenue outlook, however, suggests that the company has entered a new phase of growth driven by the emergence and proliferation of Generative AI." NVDA YTD mountain Nvidia shares in 2023 The new price target suggests shares could gain another 16.5% from Friday's close on top of nearly tripling this year. Many on Wall Street label the company a dominant AI beneficiary . Key to Goldman Sachs' target increase is the stronger compute power and greater numbers of graphics processing units needed to train growing large language models. From training alone, the analyst forecasts a $13 billion base case three-year revenue opportunity and a $316 billion bull case scenario. "We recognize that we are presenting a very large range of potential outcomes, but we believe this is fair given how nascent Generative AI is as a technology and the associated difficulty in predicting adoption rates," Hari said. He sees significantly lower but nonetheless lucrative revenue opportunities from inferencing for Nvidia. Inferencing refers to the use of AI models to make predictions and generate content such as text and images. For search, he speculates Nvidia could yield as much as $1 billion in a bull case scenario in 2025 and a $2.1 billion revenue opportunity from enterprise. Social media could yield one of the strongest revenue opportunities, with a base case scenario calling for $1.9 billion in revenue. Along with its target increase on Nvidia, Goldman Sachs upped its price objective on overseas shares of Taiwan Semiconductor Manufacturing . Analyst Bruce Lu expects marginal revenue upside near term, but projects a "meaningful" uptick medium term as wafer demand increases and the company expands capacity. "While our assumptions are made within the context of a fluid environment, especially on the Inference side as Generative AI continues to evolve, we view TSMC as well positioned to capture the AI mega trend in the coming years and thus remain positive toward its long term growth potential," he wrote. — CNBC's Michael Bloom contributed reporting.