NVIDIA Stock Surges As Demand For AI GPUs Grow, AI Chips Being Sold For Up To 20 Times More Than Gaming GPUs

NVIDIA has seen an impressive surge in its stock after HSBC upgraded the company's position due to the massive demand for its GPUs in AI.

HSBC has upgraded NVIDIA citing its strong position in the AI market and its highly capable line of chips that are accelerating the framework across multiple fields, reports Yahoo Finance. Currently, HSBC has raised the stock prices for NVIDIA (NVDA) from $175 per share to $355 per Share which is a 30% increase compared to what it was being traded at on Tuesday.

In a statement by HSBC's Head of Technology, Frank Lee, it is reported that while NVIDIA's Data Center revenue hasn't seen a significant climb over the last two quarters which can turn into an excess inventory situation, the demand for GPUs within the AI segment can offset the difference.

HSBC Head of Technology Frank Lee wrote in a note that he had concerns over Nvidia's declining data center revenue through the last two quarters as well as itsrising inventories. But he believes the pricing of A.I. chips counteracts those headwinds and changes the revenue model for Nvidia.

"In particular, we’re shocked by Nvidia’s pricing power on AI chips that we see driving earnings upside, higher valuation," Lee wrote.

via Yahoo Finance

Furthermore, the reason why the demand for GPUs in the AI segment can offset the difference is that these chips are being sold 10 to 20 times higher than the traditional gaming GeForce GPUs so the company doesn't have to push for increased sale volumes as each chip makes a huge return, reports HSBC Analysts.

The NVIDIA A100 and H100 accelerators can range in price from anywhere around $10,000 US and up to $40,000 US. Meanwhile, NVIDIA's top gaming GPU, the GeForce RTX 4090, starts at $1599 US and has also recently been selling below that.

NVIDIA is without a doubt the leader in the AI segment and it is reported that the green team will amount to 9% of the market share in AI by FY 2024. Although competitors such as Microsoft have started researching and putting vast amounts of money into their own chip design which will be launched in the coming years and target the same AI segment. But once again, NVIDIA has had its head start way ahead of its rivals.

“While the overall [total addressable market] of generative AI still remains difficult to forecast, Nvidia has the highest potential leverage from a hardware perspective,” Lee wrote.

Since the beta launch of ChatGPT in late November, investors have rewarded companies attaching themselves to the A.I. hype train and looked down on those that appear behind the eight ball.

via Yahoo Finance

More recently, Elon Must has started investing in a new AI project known as TruthGPT. Elon has hired engineers from Alphabet’s subsidiary, DeepMind, and already purchased around 10,000 GPUs to run a new AI project that involves a Large Language Model (LLM). While the report does not specify, the GPUs are likely to be NVIDIA’s A100 or H100 units. Rival, OpenAI's ChatGPT, also runs around 30,000 NVIDIA GPUs with more on the way.

NVIDIA's CEO, Jensen Huang, has called ChatGPT as one of the greatest things ever done for computing and called it the iPhone moment of AI. The Santa Clara-based GPU powerhouse saw a 40% boost in the company stock a few months ago thanks to the surging demand for its AI GPUs and also used the term "AI" 75 times in its previous earnings call.