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An Nvidia Grace CPU Superchip.
Marlena Sloss/Bloomberg
New Street Research says Wall Street analysts are still underestimating the artificial intelligence-related revenue prospects for three technology companies.
“In the last few months, expectations for the rollout of datacenter A.I. infrastructure in 2024 about doubled,” analyst Pierre Ferragu wrote on Tuesday in a note to clients. “Our overall conclusion is that expectations for 2024 still have ample room to increase, in particular for
Nvidia
,
but also for
Broadcom
and
Arista
.
”
Nvidia
(ticker: NVDA) shares rose 0.4% to $439.45 in early trading Tuesday, while
Broadcom
(AVGO) stock fell 1.1% to $844.80.
Arista Networks
(ANET) shares rose 0.2% to $178.48.
Nvidia dominates the market for chips used for AI applications, so it stands to benefit from generative AI, software that ingests text, images, and videos to create content. Interest in this form of AI was sparked by OpenAI’s release of ChatGPT late last year.
Ferragu says that while the current limitation on Nvidia’s revenue is advanced chip-packaging capacity, called CoWoS, at
Taiwan Semiconductor Manufacturing
,
he expects the semiconductor foundry to double that next year. If that happens, Nvidia may be able to beat current expectations for 2024 data-center revenue by more than 33%, according to Ferragu’s analysis.
The analyst is similarly optimistic about Broadcom’s ability to do better than expected from the AI demand boom over the next year. “Broadcom expectations also leave meaningful room for further revisions,” he wrote.
Revenue from the chip maker’s semiconductor business could beat the current average forecast by more than 15% for fiscal 2024, he said.
Ferragu is less confident about quantifying the upside for Arista’s revenue, but he believes the consensus forecast for the maker of networking equipment is “too low” as well, he said.
Write to Tae Kim at tae.kim@barrons.com
