Nvidia's GPU Business To Thrive On AI Demand, With Datacenter Investments Leading The Way: Analyst

JPMorgan analyst Harlan Sur predicts robust capital expenditure (capex) for Nvidia Corp NVDA in 2024, fueled by a surge in AI infrastructure investments.

Sur has an Overweight rating on Nvidia stock, with a price target of $850.

AI To Drive 14% Growth In Cloud Datacenter Capex

Cloud datacenter capex forecasts indicate a promising environment, with a 14% growth projection driven by AI infrastructure buildup and datacenter expansions. The updated JPMorgan outlook suggests a substantial $15 billion expansion in datacenter capex, with significant investments in server technology and supporting infrastructure like networking and storage.

This growth extends beyond top-tier cloud service providers (CSPs) to include Tier 2 CSPs, with Apple Inc AAPL leading the charge.

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AI Is A Key Driver For Nvidia’s GPU Business

The strong emphasis on AI infrastructure is propelling demand for Nvidia’s GPU solutions, fostering a multi-quarter demand trend. Sur highlights the AI demand as a key driver for Nvidia’s datacenter GPU business, particularly benefiting from increased AI server spending.

Moreover, Sur notes a shift in spending mix towards GPU and accelerators, driven by the proliferation of AI and accelerated compute applications. Nvidia aims to capture a larger portion of the expanding datacenter infrastructure market, leveraging its GPU-focused architecture optimized for various AI workloads.

Higher Software Monetization At Nvidia

In addition to hardware, Nvidia focuses on software monetization in the AI sector, targeting enterprise customers with higher software monetization strategies. This approach complements Nvidia’s hardware offerings and opens up new market opportunities.

Overall, JPMorgan is anticipating significant upside for Nvidia, driven by solid performance across segments, including PC gaming, data center, automotive, and enterprise. The sustained demand for AI-related technologies positions Nvidia for continued growth and market leadership.

By leveraging its GPU-centric approach and advancing software strategies, Nvidia is poised to capitalize on the evolving landscape of AI and accelerated computing, to drive both revenue growth and market expansion.

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Image created using artificial intelligence with Midjourney.