Morgan Stanley Stands Firm: NVIDIA's AI Chip Demand Defies Wall Street Skeptics

Despite concerns on Wall Street about the potential peak of the artificial intelligence boom due to macroeconomic risks, Morgan Stanley has reaffirmed its stance on NVIDIA, underscoring the fallacy of assertions suggesting a slowdown in AI growth. In a report published on Friday, Morgan Stanley stressed the significant demand for AI chips remains robust, driving a wave of vigorous growth in the sector.

Analyst Joseph Moore pointed out comments from key industry figures, including OpenAI CEO Sam Altman and Alphabet CEO Sundar Pichai, highlighting the ongoing shortage of GPU chips for AI companies. As Wall Street grapples with narratives of stalled AI growth, Silicon Valley continues to push forward; since the beginning of the year, AI token processing has skyrocketed, increasing fivefold, imposing substantial pressure on the ecosystem and stimulating significant investment.

NVIDIA, a major player in AI chip production, has faced challenges in 2023, partly attributed to market disruptions and debates sparked by China's DeepSeek regarding potential low demand for AI chips. The fear that super-scale AI models may require fewer AI chips has led to a sell-off of NVIDIA's shares, which have dropped 28% year-to-date. Other tech giants in Silicon Valley with strong ties to AI have seen similar declines.

Nevertheless, Moore noted NVIDIA's new chip, Blackwell, which saw minimal revenue at its launch last October, surged to $110 billion in the first quarter and may exceed $300 billion in the second quarter. This substantial growth is unlikely to decelerate soon, prompting Morgan Stanley to reaffirm its "overweight" rating on NVIDIA with a target price of $160, suggesting a 45% upside from current levels. The firm also increased its revenue and earnings per share forecasts for NVIDIA in 2026, underscoring the company as a premier investment choice amidst the AI boom.