Jensen Huang, co-founder and CEO of Nvidia, walks on cloud nine. After delivering another stellar earnings report that had Wall Street celebrating on Wednesday, Huang’s semiconductor giant was able to regain its position as the world’s third most valuable company from Google’s parent company, Alphabet.
Nvidia shares rose more than 15% in early trading Thursday, and the chipmaker’s spectacular quarter convinced investors that the AI revolution will continue to drive the company for years to come. Huang discussed the rise of AI and his company’s role in what some have called the modern gold rush on Wednesday’s post-earnings conference call. “Accelerated computing and generative AI have reached an inflection point,” he told investors. “Demand is increasing around the world in companies, industries and countries.”
Huang, whose net worth currently exceeds $60 billion, highlighted the ongoing shift from general-purpose computing to “accelerated computing” in data centers as one of the keys to Nvidia’s success, arguing that it is “a way “completely new way of doing computing” (or even “a completely new industry.”
All recommendation and personalization features in modern apps are powered by what Huang calls “tokens” for AI companies. From biotech startups generating new proteins and chemicals to OpenAI’s new AI text-to-video generative system called Sora, Nvidia’s AI tokens are indispensable to the modern tech world. Just look at the numbers: revenue exceeded estimates by a whopping $2 billion as companies gobbled up all the tokens on offer.
“For the first time, a data center is not just about computing and storing data and serving a company’s employees,” Huang said on the call. “Now we have a new type of data center that is about AI generation, an AI generation factory.”
AI generation factories
Huang explained that these AI generation factories aim to collect data and produce what he calls tokens for AI companies. “These tokens are what people experience in the amazing ChatGPT or Midjourney or search (engines),” he said.
According to Huang, Nvidia tokens are also driving the company’s growth. In this sense, the birth of AI generation factories has generated intense demand for Nvidia chips. So intense that the company had to address how it decides who can buy its products in its earnings call, promising that the process is done “fairly.”
After Nvidia’s strong earnings report, Huang also wasn’t afraid to make some bold claims about the importance of his company’s products. “My guess is that every company in the world, every software company… will run on Nvidia AI Enterprise,” he said. “So this is likely to be a very important business over time. “We’re off to a great start.”
High expectations
To say that Wall Street has high expectations for Nvidia over the next year would be an understatement. The median analyst forecast for the chipmaker is $832 (and rising, as analysts continue to alter their price targets after earnings), according to data from the Wall Street Journal. That represents a 24% increase from the stock price prior to Nvidia’s results.
“While the stock has doubled from its 2021 high, the world has changed since then and there is significant demand for artificial intelligence and therefore Nvidia has much more room to run,” James Demmert, chief investment officer at Main Street Research said Fortune, And he adds that he expects Nvidia shares to reach $1,000 in the next 12 months.
There are still some who doubt Nvidia. Gil Luria, senior software analyst at DA Davidson, argued that even if Nvidia continues to “dominate” the AI chip market over the next year, eventually, it will likely see a decline in demand for its products. Luria noted that some of Nvidia’s largest customers, including its Big Tech peers, have said they are accelerating their AI spending this year in an initial effort to catch up with demand for AI services, but that means that there could be a slowdown in spending. 2025.
“We believe that customers like Microsoft are not interested in maintaining this level of capital spending dedicated solely to AI computing, and only to Nvidia, indefinitely,” he wrote. “Accordingly, we believe our FY26 and FY27 estimates reflect a bottom on the street, as we see potential for a sequential decline in Nvidia’s data center business beginning sometime over the next four to six quarters”.
Luria has a “neutral” rating and a 12-month $620 price target on Nvidia shares, and he’s not the only analyst preaching caution when it comes to the AI chip makers’ long-term growth prospects. . On Wednesday, BCA Research chief strategist Dhaval Joshi said FortunePaolo Confino that we are in “an AI bubble” and that investors’ expectations of continued, monumental earnings growth may not be reasonable.
“The market is saying, ‘Hey, the baton will now pass to generative AI, and that trend will continue for the next five to 10 years.’ “I’m very cynical about it,” he said.
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