As far as AI stocks are concerned, Nvidia (NASDAQ:NVDA) stock remains the cream of the crop. For most investors, Nvidia remains the preeminent picks and shovels play to consider to play the surge in AI demand.
Despite recent legal challenges, NVDA stock continues to outperform amid soaring demand for AI-driven microchips. Demand for new AI chips released during the company’s developer event yesterday could lead to the next leg higher.
Let’s dive into what the company announced, and why Nvidia remains a buy in my books, despite its valuation that continues to remain lofty.
Copyright Issues
Let’s start with the company’s headwinds first, shall we?
One notable headwind facing Nvidia right now is an ongoing lawsuit facing the company from three authors alleging unauthorized use of their copyrighted books. The authors, including Brian Keene and Abdi Nazemian, claimed their works were utilized to train Nvidia’s NeMo AI platform, seeking damages for copyright infringement. The lawsuit, filed in San Francisco federal court, targets Nvidia’s alleged training of NeMo on a dataset containing copyrighted materials over the past three years.
Nvidia refrained from commenting this past week, while attorneys representing the authors remained silent on additional inquiries. The lawsuit adds Nvidia to a series of legal actions concerning generative AI technology, which generates new content from various inputs. Nvidia promotes NeMo as an efficient solution for adopting generative AI, amid similar lawsuits involving companies like OpenAI and Microsoft.
While AI remains a strong tailwind for the company, it’s clear the growth this sector provides doesn’t come without costs. That said, despite these unique challenges, NVDA stock has soared nearly 600% since 2022, reflecting investor confidence in the company’s AI innovations.
GTC Event Continues to Spark Interest
One of the most pertinent catalysts driving increased interest around Nvidia is its GTC event from March 18 to 21, dubbed the “Woodstock of AI” by analysts. A convergence of developers and tech enthusiasts focused on the next generation of AI chips are currently at this conference, with CEO Jensen Huang releasing the company’s largest and most powerful chip at the conference yesterday.
Dubbed Blackwell, this powerful graphical processor chip design is significantly faster than existing AI chips. Expected to perform roughly four-times as fast as the next most powerful AI chip, Blackwell could revolutionize this sector as we know it, and result in an even more insulated position atop the AI chip space.
Now, this chip will require a significant amount of power to operate. So, this release isn’t without concern. However, there’s a lot to like about Nvidia’s innovation in this space, and larger and more powerful continues to be in vogue.
Continued Positive Outlook
Nvidia CEO Jensen Huang emphasized the value of facing early setbacks for eventual success at the 2024 Siepr Economic Summit. He highlighted Nvidia’s position as a key provider of AI chips. Huang stressed the importance of understanding success for achieving true artificial general intelligence.
Huang emphasized the role of setbacks in achieving greatness, openly discussing the importance of adversity. He wished Stanford students ample doses of challenges for growth. Although the message may sound unorthodox, the company is driven to succeed due to its proven resilience.
Moreover, Nvidia also exceeded Wall Street expectations during its Q4 2023 earnings call. The projection for 2024 was also optimistic, making investors more confident in investing. Part of what drives Nvidia’s fire is its close records to the S&P 500, marking significant surges.
Nvidia Remains a Buy
Bank of America Securities analyst Vivek Arya raised his NVDA stock price target from $925 to $1100 with a “buy” rating, citing the expanding AI boom. Arya emphasized the significance of the Nvidia GPU Technology Conference (GTC), likened to the “Woodstock” of AI, predicting bullish momentum post-event.
I think until the narrative changes in the market, Nvidia remains the most prescient way investors can gain exposure to the growth of the AI revolution. The company’s new Blackwell chip should insulate Nvidia further from competition, and provide an even greater moat (as if that’s even possible). So, until something changes, NVDA stock will be atop investor buy lists for some time to come.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
