Taipei, Taiwan – Nvidia, a chip designer, has seen its stock price surge to around $1,200 per share, marking a significant 287% increase since the impressive earnings report in May 2023 that sparked interest in generative AI technology. As the stock prepares to undergo a 10-for-1 split on Monday, dropping to approximately $120 per share, investors wonder if the stock price will ever return to its previous high.
There are four reasons why Nvidia’s stock price could potentially reach $1,200 again by 2026. New factors include the fear of governments falling behind in the generative AI race, leading to increased chip purchases and revenue for Nvidia. Additionally, the company’s strong performance, growth investments, and CEO Jensen Huang’s leadership are key drivers that could support a stock price rebound.
On the other hand, there are risks to consider, such as business leaders’ conflicting attitudes towards generative AI. While there is a desire to stay competitive in the AI space, concerns over potential AI errors and reputational damage pose challenges for companies in implementing high-impact generative AI applications.
Governments globally are actively investing in GPUs to develop sovereign AI capabilities by training language models in local languages using citizen data. This trend is fueled by a push for strategic self-reliance amidst escalating tensions between major world powers. Nvidia anticipates that sovereign AI spending could boost its revenue by $10 billion in 2024, providing a new source of growth for the company.
In addition to sovereign AI demand, other growth drivers for Nvidia include exceeding expectations in first-quarter results and forecasts. The company’s aggressive product innovation strategy, including the introduction of Blackwell chips and investments in cloud services, could further support growth. CEO Jensen Huang’s leadership and ability to navigate market trends will be crucial in sustaining Nvidia’s growth trajectory.
For companies exploring generative AI applications, the challenge lies in balancing the potential benefits with the risks of AI errors. With limited high-payoff applications currently in use, the future demand for Nvidia’s GPUs may hinge on the successful implementation of generative AI technology across various sectors. As businesses and governments strive to stay ahead in the AI race, the demand for Nvidia’s chips and subsequent stock performance could continue to grow.