Nvidia AI Domination Is A Double-Edged Sword For Investors: 'Demand Could Outstrip Supply,' Analyst Says

Zinger Key Points

Nvidia's AI-driven growth is promising, but investors must weigh production delays and geopolitical risks impacting future returns.
Strong demand for Nvidia's GPUs continues, despite challenges, underscoring its key role in the evolving AI landscape.
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Nvidia Corp‘s NVDA latest earnings report drew investor attention to the sustainability of AI capital expenditures (CapEx) amid delays in Nvidia's much-anticipated Blackwell GPU production.

But, as JPMorgan analyst Harlan Sur puts it, "Even slight delays in Blackwell will not take away from [cloud service provider] focus on AI, to continue to drive R&D, and on AI product and applications."

"Demand for Blackwell is very strong and could outstrip supply at least through the middle of [2025]," Sur adds.

An Opportunity To ‘Drive Several Billion Dollars’

Sur's confidence in Nvidia's AI strategy is underscored by the company's guidance of an 8% quarter-over-quarter increase in revenue, fueled by "continued strong spending from its customers to support their AI/accelerated compute initiatives."

This outlook comes despite delays in Blackwell production, which Sur notes are "pushed out, as we expected, by ~2 months."

However, this delay is a mere bump in the road. Nvidia's Hopper GPU platform is keeping the company on track to potentially "drive several billion dollars of revenue" in the upcoming quarters.

In The Early Stage Of The Gen AI Investment Cycle

The conversation on AI CapEx doesn't end there. Gokul Hariharan, co-head of Asia Pacific TMT Research at JPMorgan, highlighted that Nvidia is still "in the early stage of an accelerated computing and Gen AI investment cycle," with customers seeing "very strong growth" next year.

However, the market remains on edge, with some investors "still undecided" on AI adoption’s broader trajectory, especially amid a competitive and rapidly evolving landscape, notes Hariharan.

Nvidia Pivotal In Driving The Semiconductor Sector Forward

Despite the uncertainties, there's no denying Nvidia’s pivotal role in driving the semiconductor sector forward. As Sur notes, Nvidia's growth is a bellwether for the entire industry, where "all types of chips are needed to support the effort – compute, network, storage, and memory."

This broad demand has ripple effects across the tech value chain, benefiting a range of semiconductor companies.

Looking ahead, Nvidia’s ability to monetize its AI capabilities remains a critical focus. Sur emphasizes the potential for "real profits, revenue growth, and increased profitability" as generative AI adoption accelerates.

However, he cautions that "it is still early in the adoption phase," leaving room for both opportunity and risk.

Nvidia At Crossroads

Ultimately, Nvidia stands at a crossroads, balancing between the burgeoning promise of AI and the practicalities of scaling production and managing geopolitical risks.

As Sur aptly sums up, the AI race is far from over, but Nvidia’s "ability to create completely new markets" remains its strongest hand in a high-stakes game.

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