In the past four weeks, AI inference has exploded, GPUs are burning, and NVIDIA is still in short supply
Morgan Stanley pointed out that due to the huge demand for inference chips driven by large language models, NVIDIA is facing a situation of GPU supply shortage. However, under the ongoing supply constraints and pressure on gross margins, Morgan Stanley slightly lowered NVIDIA's target price to $160. In the long term, the company's growth trajectory remains strong
In the past four weeks, investor sentiment has deteriorated due to macroeconomic and supply chain risks. However, at the same time, demand for NVIDIA's GPU cores has surged due to the enormous demand for inference chips from major large language models (LLMs), and this demand is widespread across all regions.
According to a report released by Morgan Stanley's Joseph Moore team on the 25th, the main driver of this strong demand is the increase in token generation, which has grown more than fivefold since the beginning of the year. This has put immense pressure on the ecosystem and driven a surge in investment to handle these workloads.
Several AI companies have reported explosive growth in user numbers. For example, data from API companies like Open Router shows that many companies are forced to scramble for GPU resources to meet the massive demand for inference software, with even the situation of "only one GB200 left" by 2025.
Morgan Stanley believes that this demand for inference is key. It is driven by the portion of users utilizing models and generating revenue, proving that the scaling of inference models is real, which is fundamentally different from relying solely on venture capital for training demand.
Morgan Stanley Lowers Target Price, But Growth Potential Remains
Despite strong demand, Morgan Stanley pointed out that the supply of NVIDIA's Blackwell chips remains constrained, especially the GB200/300 models, which cannot meet the explosive growth in demand in the short term.
While demand for the aging Hopper GPUs has improved, considering the 5-6 year depreciation cycle for cloud customers, the return on investment may not be ideal.
The combined effects of a rising dollar, tight supply, and export restrictions have raised concerns in the market about NVIDIA's short-term profitability. Morgan Stanley has therefore lowered its target price to 160, a slight adjustment from the previous 162. This mainly reflects the overall decline in valuations among peers rather than changes in the company's fundamentals. As of the time of publication, NVIDIA's stock price was $111, approximately 45% higher than Morgan Stanley's target price.
Morgan Stanley believes that ongoing supply constraints, gross margin pressures, and other negative impacts are affecting market sentiment. However, given the strong feedback from actual customers regarding real demand, the lowered target price reflects Morgan Stanley's cautious attitude towards NVIDIA's short-term performance while also demonstrating confidence in its long-term growth potential.
Morgan Stanley has raised its revenue forecast for fiscal year 2026 by 10.7% and its earnings per share forecast by 11.9%, believing these figures may still be very conservative.
