New Street Research has reported that Wall Street analysts are underestimating the potential revenue prospects related to artificial intelligence (AI) for three major technology companies. Analyst Pierre Ferragu stated in a client note on Tuesday that expectations for the deployment of datacenter AI infrastructure in 2024 have doubled in recent months. He believes that there is still significant room for growth in expectations, particularly for Nvidia, Broadcom, and Arista.
As a result of this news, Nvidia's shares experienced a 0.4% rise to $439.45 during Tuesday's early trading, while Broadcom's stock fell 1.1% to $844.80. Additionally, Arista Networks saw a 0.2% increase in shares, reaching $178.48.
Nvidia currently holds a dominant position in the market for chips used in AI applications, which puts it in a prime position to benefit from generative AI—a software capable of producing content by analyzing text, images, and videos. The release of ChatGPT by OpenAI last year amplified interest in this form of AI technology.
Ferragu notes that Nvidia's current revenue limitation lies in its advanced chip-packaging capacity known as CoWoS at Taiwan Semiconductor Manufacturing. However, he expects the semiconductor foundry to double this capacity next year. Consequently, Nvidia may exceed current expectations for data-center revenue in 2024 by more than 33% based on Ferragu's analysis.
Broadcom is also predicted to perform better than anticipated due to the increasing demand for AI technologies. Ferragu highlights that expectations for Broadcom have significant room for further revision.
Furthermore, Ferragu believes that the consensus forecast for Arista, a prominent networking equipment manufacturer, is too low but does not specify the potential upside for its revenue.
In conclusion, New Street Research's report suggests that Wall Street analysts are not accurately projecting the AI-related revenue potential for Nvidia, Broadcom, and Arista. If these companies capitalize on the growing demand for AI technologies, their revenue may exceed current forecasts significantly.
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