Citi Elevates Nvidia's Potential with Optimistic AI Market Outlook
Citi raises Nvidia's stock target amid encouraging AI sector growth forecasts, emphasizing the company's pivotal role and potential challenges.
In a bold move underscoring the rapid evolution of the AI industry, Citi has recently revised its stock target for Nvidia, raising it to \(190 from a previous estimate of \)180. This optimistic adjustment reflects the growing total addressable market (TAM) for AI data centers, where Nvidia plays a critical role. According to Investing.com, the bank’s newfound enthusiasm for Nvidia is particularly tied to heightened expectations for both compute and networking revenues, as the AI landscape continues to expand.
Reshaping the AI Data Center Landscape
Citi’s analysis reveals an impressive projection for the AI data center semiconductor market, expecting it to swell to \(563 billion by 2028, a noteworthy 13% increase from prior estimates. Such growth is attributed to robust sovereign demand and burgeoning opportunities within the networking realm. "Our revised model anticipates the AI TAM reaching \)563 billion in 2028, significantly bolstered by sovereign AI investments contributing billions this year alone,” explains Atif Malik of Citi.
Networking Set for Transformative Growth
One of the key drivers behind this positive outlook is the forecasted expansion in the networking sector, with its TAM now set at $119 billion. This surge accommodates the increasing need for larger AI training clusters and emerging intra-networking potential. Citi foresees networking contributing to 21% of Nvidia’s AI data center TAM by 2028, a rise from the previous 18% projection.
Nvidia’s Strategic Positioning
Nvidia’s Blackwell platform rollout is underway, with Citi analysts expressing confidence in the company’s ability to overcome supply chain hurdles. “Deployments are proceeding swiftly,” remarks Malik, noting Nvidia’s blueprint for transitioning from Hopper to the advanced GB300 model. The firm’s commitment to expanding its products’ footprint supports its goal of achieving mid-70% gross margins by fiscal year-end.
Navigating Potential Risks
While Citi’s outlook is overwhelmingly positive, potential risks lurk on the horizon. The possibility of new U.S. export limitations could pose a challenge, potentially impacting Nvidia’s operations in nations like Malaysia and Thailand. Malik cautions investors about this risk, asserting, “Nvidia remains vigilant in monitoring GPU movements, prepared to adapt amidst geopolitical shifts.”
As the market reacts to Citi’s projections, Nvidia’s strategic positioning in the AI revolution becomes ever more pivotal. This intriguing blend of opportunity and risk presents a multifaceted narrative as the company forges its path in the rapidly evolving AI domain.