Reasons to Stay Bullish on Nvidia Stock

The recent report suggesting that OpenAI might explore alternatives that could potentially eliminate Nvidia as a chip supplier has put the spotlight on Nvidia stock. However, despite this news, there are still compelling reasons to remain bullish on Nvidia.

OpenAI's Exploration

OpenAI, a renowned player in the field of artificial intelligence, is reportedly considering the development of its own AI chips. According to anonymous sources cited by Reuters, the company is also exploring options such as closer collaboration with chip manufacturers like Nvidia or seeking alternative suppliers in light of the chip shortage that hinders AI growth.

Nvidia's Key Role

Nvidia plays a crucial role as a supplier of graphic processing units (GPUs) and application-specific integrated circuits (ASICs), which are vital components for driving advanced computing in the realm of artificial intelligence. The company's strong presence in AI has been instrumental in its impressive financial performance throughout this year, propelling Nvidia stock to soar over 210% since January.

Analyst Expectations

Analysts at Citi express confidence in Nvidia's position, stating that they anticipate the company to maintain around 90% market share in the AI GPU market over the next 2-3 years. Furthermore, they suggest that if the Reuters report turns out to be true, it would align with the prevailing belief that both GPUs and ASICs are essential for scaling up AI infrastructure. ASICs are anticipated to be primarily utilized for smaller and more specialized models, while GPUs will serve the purpose of training and inference for larger and more complex models.

Market Response

Although Nvidia stock experienced a 2% drop in premarket trading on Monday, underperforming futures tracking the S&P 500 and Nasdaq, it is important to consider the broader context and long-term prospects of the company.

In conclusion, while uncertainties may arise due to OpenAI's potential chip development plans, Nvidia's strong foothold in the AI market, its integral role as a supplier of GPUs and ASICs, and positive analyst projections offer compelling grounds for remaining bullish on Nvidia stock.