Nvidia is the top AI pick and the stock could jump 15% as demand has picked up since the chip maker’s blockbuster earnings report, Morgan Stanley says

• Morgan Stanley raised its price target on Nvidia to $500 and called the stock a “top pick.”

• Analysts said demand has rebounded since the company’s huge earnings report last month.

• Nvidia is taking orders from customers who aren’t thought of as major buyers yet.

Nvidia stock Morgan Stanley said it has more room to run as demand has only picked up since the company’s groundbreaking earnings report last month.

Analysts raised their price target on Nvidia Wall Street blown With AI chips, to $500 from $450, which is a 15% increase from current levels.

That’s despite shares already up 200% year-to-date and joining a handful of other tech giants with Market value of $1 trillion or more.

Morgan Stanley also named Nvidia its “top pick,” taking away that title from previous holder, AMD’s rival chip stock. Analysts said Nvidia has more upside in the near term, and they predicted it would be the only company to beat estimates and raise guidance this calendar year.

“The demand environment for AI training has continued to pick up since the NVIDIA report, with our industry contracts reporting daily new orders from customers who are not yet considered major customers,” the note said.

Last month, Nvidia raised its revenue forecast for the second quarter to $11 billion, more than 50% above the consensus, due to The growth of the generative artificial intelligence market. The company’s AI chips help push the technology back ChatGPT chatbots and Alphabet’s Bard from OpenAI.

There’s been a rapid shift in investment away from traditional server infrastructure and toward AI infrastructure, Morgan Stanley said, calling Nvidia “the cleanest story in AI hardware.”

“While we’ve been positive since the stock’s upgrade earlier in the year, we’re nowhere near as optimistic as we should have been,” the analysts said.

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Not only are existing customers accelerating their spending, but there is also strong spending coming from application developers, enterprise IT departments, and even governments, according to the note.

While the numbers may not be sustainable in the long term, Morgan Stanley still sees “higher capital intensity” over the next several years.

“Frankly, the commentary about these markets is more positive than anything we’ve heard in 29 years of covering semiconductor stocks.”

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