Nvidia Stock Rises After Upgrade. The Case to Buy Amid Oracle AI Surge.

Nvidia chips are the favored choice for training artificial-intelligence models. (Courtesy NVIDIA)

Key Points

About This Summary

• Nvidia’s stock rose following Oracle’s cloud-computing forecast, continuing Wednesday’s gains.
• Oracle added $317 billion in future contract revenue, boosting the AI sector, including Nvidia.
• Analyst estimates suggest significant Nvidia hardware spending for cloud infrastructure and data centers.

Nvidia stock was gaining early Thursday as the artificial-intelligence chip maker continued to feel the benefits of Oracle’s huge cloud-computing forecast.

Nvidia shares were up 0.5% at $178.25 in early trading. The stock rose 3.9% on Wednesday.

The AI sector as a whole got a boost from Oracle after the cloud company revealed it added $317 billion in future contract revenue during its latest quarter that ended in Aug. 31.

Signs of increasing demand for AI computing swayed D.A. Davidson analyst Gil Luria to upgrade his rating on Nvidia stock to Buy from Neutral and raise his price target to $210 from $195. He had previously been one of the few skeptics on Nvidia stock left on Wall Street.

“We believe the growth in AI compute demand will drive enough demand to sustain Nvidia’s growth into next year and likely beyond. While there are still several cross-currents, we believe those are not enough to change that trajectory,” Luria wrote in a research note.

ChatGPT-developer OpenAI signed a contract with Oracle to purchase $300 billion in computing power over roughly five years, The Wall Street Journal reported, citing people familiar with the matter. OpenAI and Oracle didn’t immediately respond to requests for comments early Thursday.

“This step-up…reflects the continuing need for GPU Compute to satisfy AI demand across both training and inference. And is a long term positive for Nvidia,” wrote David O’Connor, an analyst at BNP Paribas , in a research note.

O’Connor estimated that $500 billion cloud-rental revenue for a company like Oracle would likely translate into around $100 billion in spending on computing infrastructure and five gigawatts of data-center capacity. He has the equivalent of a Buy rating on Nvidia stock and a $240 target price.

Nvidia CEO Jensen Huang recently told analysts that a single gigawatt data center would require around $35 billion in spending on his company’s hardware—plus $15 billion on additional components—and he expected future “AI super-factories” would require multiple gigawatts of power.

Among other chip makers, Advanced Micro Devices stock was down 1% and Broadcom shares were falling 0.2% in premarket trading.

Write to Adam Clark at adam.clark@barrons.com