Morgan Stanley Sees 45% Upside for NVIDIA Amid Robust AI Chip Demand

In a recent report, morgan stanley has reaffirmed its "overweight" rating for nvidia, emphasizing that the demand for AI chips remains robust and is driving significant growth in the industry. The firm has set a price target of $160 for NVIDIA, which represents a 45% upside from current levels. This reaffirmation comes at a time when there is growing skepticism about the sustainability of the AI boom, with some investors believing that the market has reached a peak and that AI-related expenditures may be curtailed.

Despite these concerns, Morgan Stanley analysts argue that the notion of slowing AI growth is misguided. They point to the increasing demand for AI chips and the rapid expansion of AI token processing, which has surged fivefold since the beginning of the year. This surge has placed considerable pressure on the entire ecosystem, driving a wave of investment in the sector. The analysts highlight that the demand for AI chips is not only substantial but also continues to grow, fueled by the widespread adoption of AI technologies across various industries.

Joseph Moore, a Morgan Stanley analyst, noted that recent statements from OpenAI CEO Sam Altman and Alphabet CEO Sundar Pichai indicate that AI companies are still struggling to secure enough GPU chips. This underscores the ongoing demand for high-performance computing resources in the AI sector. Moore also emphasized that while some investors may be concerned about the potential for reduced AI chip demand due to advancements like China's DeepSeek model, the overall trend points towards continued growth.

NVIDIA's new Blackwell chip, which had minimal revenue in October of last year, saw a dramatic increase to $110 billion in the first quarter and is expected to surpass $300 billion in the second quarter. This rapid growth is anticipated to continue, further solidifying NVIDIA's position as a key player in the AI sector. The firm has also raised its revenue and earnings per share estimates for NVIDIA in 2026, reinforcing its stance that the company remains a top investment choice in the AI landscape.

In summary, Morgan Stanley's report underscores the continued strength of the AI chip market and NVIDIA's pivotal role within it. Despite market volatility and investor skepticism, the firm's analysts remain optimistic about the future of AI and NVIDIA's prospects. The reaffirmation of the "overweight" rating and the increased price target reflect Morgan Stanley's confidence in NVIDIA's ability to capitalize on the growing demand for AI technologies.

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