Nvidia's TAM rising to nearly ~$2 trillion: analyst

Investing.com -- Bank of America analysts reiterated a Buy rating on Nvidia (NASDAQ:NVDA ) shares after hosting Nvidia executives, including CFO Colette Kress for a dinner earlier this week.

Analysts remain confident in Nvidia as a leading AI incubator, noting its unique platform that is driving growth in various sectors including physical AI, AI workstations, and autonomous driving through partnerships with companies like Uber (NYSE:UBER ) and Toyota (NYSE:TM ).

According to BofA, Nvidia is currently positioned at the forefront of a $2 trillion infrastructure opportunity, with the transformation of traditional architectures to accelerated computing and the support of new AI business models.

The analysts cautioned, though, that Nvidia stock could face volatility leading up to its Q4 earnings report on February 26, 2023, due to possible enhanced China restrictions. The next GTC conference, scheduled for March 17, 2023, is anticipated to be a significant catalyst for the company.

Overall, BofA notes the demand for AI remains robust, with both the Hopper and the new Blackwell platforms showing strong interest.

“Hopper run rate is not necessarily tied to demand, but rather to the overall supply situation which can impact the product mix,” analysts led by Vivek Arya pointed out.

Nvidia has indicated that the Blackwell platform is now available through 15 partners in over 200 configurations, and they expect gross margins to return to the mid-70% range once Blackwell is fully ramped up.

Looking ahead, the chip giant remains confident that the demand for AI compute will continue to grow steadily, driven by factors such as model pre-training, post-training, synthetic data generation, and new models like OpenAI's offerings that enable test-time scaling for inference.

Nvidia claims it is addressing a nearly $2 trillion opportunity, driven by the shift to accelerated computing and the rise of AI-driven business models.

With the current cycle suggesting that the industry is only 20-25% into this long-term growth opportunity, Nvidia's data center sales are projected to reach $113 billion by 2024 and $185 billion by 2025, according to analysts.

Nvidia executives also acknowledged the growing interest in custom ASICs but emphasized their limited potential for quickly gaining market share.

“The idea of custom ASIC is not new (nearly ten years old today), and it generally takes 2-3 years to develop one, if successful,” analysts said.

Nvidia highlighted the rapid evolution of AI hardware and software demands, making ASICs less practical, apart from Google (NASDAQ:GOOGL )'s TPU, which was developed years ago.

The company also pointed out that its own platform offers a form of customization, with over 200 SKUs for its Blackwell line, enabling flexibility to meet diverse customer requirements, including scale-up and scale-out solutions.

Source: Investing.com