Graphics-chip maker Nvidia (NVDA) leads the market for artificial intelligence chips today, but rising competition means it can't rest on its laurels, a Wall Street analyst says. Nvidia stock surged on Monday.
X"AI compute technology is driving the next wave of semiconductor growth," Mizuho Securities analyst Vijay Rakesh said in a note to clients late Friday. "Nvidia remains the undisputed leader in the AI training and inferencing roadmap, but we note competition from Google's TPU V4, Intel's Habana, SambaNova, and others."
Artificial intelligence applications could drive the total semiconductor market from $400 billion in annual sales now to $1 trillion by 2030, Rakesh said.
"Nvidia remains at the forefront of AI hardware technology, as it continues to release more powerful and faster products for computing AI workloads," Rakesh said. He rates Nvidia stock as buy.
Nvidia Stock Jumps To Record High
On the stock market today, Nvidia stock rose 5% to 799.40. Earlier in the session, Nvidia stock notched an all-time high of 803.15.
In addition to Alphabet's (GOOGL) Google and Intel's (INTC) Habana, Nvidia is facing a host of new competitors. They include Cerebras, Graphcore and SambaNova Systems.
"We continue to see AI driving a secular semiconductor industry roadmap," Rakesh said. "Data-intensive cloud native processes for image recognition, recommenders and conversational AI models such as Google's BERT will drive increasing workloads by orders of magnitude and push the boundaries of hardware performance."
The AI chip market generated about $23 billion in sales in 2020, or about 5% of the broader semiconductor market, Rakesh says. The market could grow to over $70 billion, or more than 10% of total semiconductor sales, by 2025, he said. This would represent a compound annual growth rate of 25% for the AI chip segment vs. 7% growth for the broader semiconductor market.
Semiconductor equipment suppliers like Applied Materials (AMAT) and Lam Research (LRCX) are "key enablers" for the growth of the AI chip market, Rakesh said. They will provide the gear for making next-generation AI chips.
NVDA Stock Is On Three IBD Watchlists
Meanwhile, investment bank Citi on Monday said the chances of Nvidia completing its acquisition of chip designer Arm have improved. Citi now sees a 30% probability that the deal gets approved, up from its previous view of a 10% probability.
Citi changed its view after Broadcom (AVGO), Marvell (MRVL) and Taiwan's MediaTek become the first Arm customers to publicly support the $40 billion proposed takeover.
Nvidia stock is on the IBD 50 list of top-performing growth stocks. It also is on IBD's Leaderboard watchlist and the IBD Big Cap 20.
On May 28, Nvidia stock broke out of a cup base at a buy point of 648.67, according to IBD MarketSmith charts. Nvidia stock is now extended beyond the 5% buy zone of its breakout. In fact, it is now trading in the 20%-25% profit-taking zone.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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