Nvidia Stock Rises on HSBC Upgrade

Nvidia (NASDAQ: NVDA) is trading higher on Wednesday after the chipmaker saw its stock upgraded by two notches at HSBC.

This way, the only Sell-equivalent rating on NVDA shares is now gone, with sell-side analysts rushing to recommend the company as an attractive investment opportunity despite strong year-to-date (YTD) gains (+84.8%).

HSBC analyst Frank Lee said that Nvidia’s artificial intelligence (AI) opportunity is simply too big to ignore, and it single-handedly offsets the concerns around the slowdown in Nvidia’s two biggest business units – data center and gaming.

“We’re shocked by Nvidia’s pricing power on AI chips that we see driving earnings upside, higher valuation,” Lee wrote in the note. 

The analyst also hiked the price target on Nvidia stock to $355 per share, signaling an upside potential of over 30% relative to the closing price on Monday. Lee also acknowledged the mistake of not moving higher on the rating scale earlier.

“We were too focused on the slowdown in datacentres, but what really surprised us was its pricing power on AI chips.”

According to Bloomberg, Nvidia now has 43 buys, 13 holds, and no sell ratings among analysts, which demonstrates the company’s strong product pipeline. 

The HSBC upgrade more than offset some negative news that circulated just before the market opened on Tuesday. The Information reported that Microsoft is working to develop its own artificial intelligence (AI) chip for powering large-language models.

Accordingly, Microsoft had been working on a project “Athena,” for the past 4 years, with some chips already being tested by a small group of Microsoft and OpenAI, the developer of the ChatGPT chatbot backed by Microsoft staff. 

It remains unclear if and when Microsoft plans to start using its own AI chips. In the meantime, Nvidia remains the No.1 producer of high-end chips needed for powering chatbots.