Nvidia Stock Is Still ‘Best Positioned in AI,’ Says Rick Schafer

Nvidia (NASDAQ:NVDA), in a sense, is the rock star of the AI chip world – commanding center stage with groundbreaking offerings and a devoted following of developers and customers.

And while there may not have been much sex, drugs and rock’n’roll on Oppenheimer’s 23rd Annual Semiconductor Bus Tour, conversations with Nvidia CFO Colette Kress and IR Director Stewart Stecker left Oppenheimer analyst Rick Schafer feeling confident the company is well-positioned to keep topping the AI chip charts. “Fresh off a tour of Europe and GTC Paris, tone remains bullish,” noted Schafer, an analyst who ranks in 4th spot amongst the thousands of Wall Street stock experts.

So, what did Schafer learn? Management has been actively engaging with “world leaders” to support the development of sovereign AI infrastructure, thereby adding “even more inertia to the AI flywheel.” The size of the sovereign AI market opportunity (or TAM – total addressable market) tends to scale with a country’s GDP, and Nvidia estimates the total sovereign AI TAM at around $1.5 trillion – with Europe alone representing roughly $120 billion.

Over the next two to three years, the company expects to see the emergence of multi-gigawatt AI data centers, or “AI factories.” A single gigawatt-scale facility translates to a $40 billion to $50 billion opportunity for Nvidia, accounting for about 60% of the total infrastructure spend. Schafer thinks gigawatt deployments are likely to appear by 2027, with larger multi-gigawatt builds following in 2028.

Currently, Nvidia’s AI revenue is split roughly 60/40 between training and inference, however, management has noted that inference is already starting to take a larger share of the mix. With rising demand for inference, Schafer believes Nvidia is well-positioned to benefit – its “ubiquitous NVDA AI platform” (spanning GPUs, networking, and software) delivers “best overall performance”across both training and inference, and remains adaptable to a wide range of workloads.

Schafer also brings attention to NVLink Fusion – Nvidia’s new interconnect technology that expands its addressable market by enabling seamless connectivity between CPUs and AI accelerators. For example, customers can now swap in x86 CPUs in place of Nvidia’s ARM-based Grace CPUs without losing architectural coherence.

Regarding China, Nvidia took a $4.5 billion write-down due to U.S. government restrictions on selling its H20 chips to the country. However, Schafer believes Nvidia’s exposure there is limited – sales to China now represent less than 5% of total revenue – and the analyst thinks the company is actively developing lower-spec solutions that could gain approval if export policies ease.

“At the forefront of the AI industry, NVDA remains best positioned in AI, benefiting from full stack hardware/software solutions and unique rack-scale,” Schafer summed up.

To this end, Schafer rates NVDA shares as Outperform (i.e., Buy) while his $175 price target implies the stock will post gains of 20% over the coming months. (To watch Schafer’s track record, click here)

Elsewhere on the Street, the stock claims an additional 34 Buys, 4 Holds and 1 Sell, for a Strong Buy consensus rating. The average target stands at $173.19, a figure that factors in a one-year uptick of 19%. (See Nvidia stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.