Nvidia Set to Skyrocket with ChatGPT's Success

Nvidia Corporation, NVDA stock, the chip maker, is expected to benefit from the hype surrounding OpenAI's chat bot, ChatGPT. The company's stock has risen 22% in the first three weeks of the year, making it one of the best performers in the S&P 500 Index.

This is due to Nvidia's dominance in the market for graphics chips designed for complex computing tasks needed to power AI applications. The more people use ChatGPT, the more computing power OpenAI will require to generate responses to the millions of queries received from students and songwriters.

CityGroup Predictions

Citigroup Inc. recently estimated that rapid growth in ChatGPT usage could result in sales for Nvidia of $3 billion to $11 billion over 12 months. This is based on projections for the number of words generated by ChatGPT and the revenue per word for Nvidia. Bank of America Corp. and Wells Fargo & Co. have also stated that Nvidia is well-positioned to take advantage of the greater computing needs required by AI models like ChatGPT.

However, it's also possible that ChatGPT is just the latest trend to sweep through the tech industry, only to fizzle out like orders from cryptocurrency miners.

Nvidia investors, and those who have invested in other semiconductor makers, are aware that the promise of continuous growth can be an illusion. After sales surged more than 50% in each of Nvidia's past two years, revenue is projected to be flat in fiscal 2023 at about $27 billion.

Nvidia Shares Ups and Downs

Nvidia shares have lost almost half their value since peaking in November 2021. Despite the sell-off, the stock remains one of the most expensive in the Nasdaq 100, with a price that's about 41 times the profit projected over the next 12 months. This is well above its average over the past decade.

Analysts see the stock gaining 13% to $200.68 over the next 12 months, based on the average price target. Ivana Delevska, chief investment officer at SPEAR Invest, believes that even if ChatGPT itself doesn't result in higher orders for Nvidia, its success will fuel the development of more tools that will require greater computing power and therefore more chips. This will lead to more investment from companies wanting to catch up in this spa