Market Analysis

Nvidia Rises on Bullish Ratings, Falters Post-Fed Decision

Amos Simanungkalit · 19 Dec 202439.6K Views

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Nvidia (NVDA) stock initially surged by as much as 4.8% on Wednesday after Wall Street analysts reaffirmed their "Buy" ratings despite concerns about rising competition and the potential slowdown in AI chip demand. However, the stock reversed course in the afternoon, closing the day down by around 1%, as broader market declines followed the Federal Reserve's projections of fewer rate cuts and persistent inflation in 2025.

In the days leading up to the shift, analysts from firms like Bernstein, TD Cowen, Morgan Stanley, and Truist maintained their positive outlook on Nvidia. Truist’s William Stein raised his price target for the stock from $169 to $204, citing support from industry contacts who affirmed Nvidia's dominance in the AI chip market.

However, Nvidia’s GPUs face competition as major tech companies, including Google, Meta, Microsoft, Tesla, and Amazon, develop their own custom chips. Broadcom’s announcement of chips for clients such as OpenAI and Apple also pressured Nvidia’s stock, as these custom chips, known as ASICs (Application-Specific Integrated Circuits), are cheaper and tailored to specific AI needs. A Morgan Stanley report predicted that ASICs could grow their share of the AI chip market from 11% in 2024 to 15% by 2030.

Despite this, Morgan Stanley believes Nvidia's strong track record will help it maintain its market dominance. Bank of America’s Vivek Arya echoed this sentiment, emphasizing Nvidia’s ongoing competitive edge.

Concerns also linger that the surge in Big Tech spending on AI chips, which has benefited Nvidia, may slow. Companies like Microsoft and Google have indicated their AI-related spending will decelerate, and there are worries that the pace of AI model advancements may not continue at the same rate, which could affect future investments. Still, TD Cowen analyst Joshua Buchalter noted that Nvidia remains confident in the industry’s ongoing innovation and growth.

Stein also predicts that Nvidia will launch a standalone CPU in 2025, opening up a $35 billion market opportunity. Currently, Nvidia sells its Arm-based Grace CPUs alongside Blackwell GPUs in servers but does not offer CPUs separately.