MW Did Nvidia just dispel the bear case for its stock? Why this analyst thinks so.

By Britney Nguyen

The shift from AI training to inferencing, especially for reasoning models, is an opportunity to drive greater GPU demand, the company recently said. Bears have worried about this transition.

Earlier this year, Chinese artificial-intelligence startup DeepSeek rocked Wall Street with competitive models that it said cost much less and used fewer chips than advanced models in the U.S. But Nvidia Corp. - which saw its stock sell off sharply in the immediate aftermath of the DeepSeek reveal - thinks the startup only showed an opportunity for more demand for its graphics processing units.

On Wednesday, Ian Buck, Nvidia's $(NVDA)$ vice president of accelerated computing, said that DeepSeek's R1 reasoning model "has kind of made every model a reasoning model," in turn driving demand for AI inferencing, or the process of an AI model generating a response. That's creating an opportunity to deploy more GPUs and servers, Buck said during a keynote at Bank of America's Global Technology Conference.

"It came, actually, at a great time for GB200 because of all those GPUs connected with NVLink and Blackwell, and you're seeing that now," Buck said, referring to the company's systems that power AI training and inferencing.

There's 20 times more total market opportunity for inferencing now because of the rise of reasoning models, Buck noted.

Read: Nvidia just showed that things are only looking up from here

Jordan Klein, an analyst at Mizuho Securities, said in a note on Thursday that Buck made a strong case against bearish views that Nvidia will miss out on revenue and growth opportunities due to the shift from training large AI models, which relies more heavily on its GPUs.

"He explains really well why DeepSeek training methods and R1 is not all that new and will actually be a bigger positive for industry and usage versus a negative for NVDA and GPU demand," Klein wrote.

Nvidia's stock "remains one of my favorite tech long ideas right now," he added.

Bank of America analyst Vivek Arya said in a note Thursday that the company's "tone was very positive regarding demand and continued customer interest across cloud and enterprise" - even more so now with the full-scale ramp of supply. Arya hosted Buck's keynote, as well as an investor dinner with Nvidia Chief Financial Officer Colette Kress and Vice President of Investor Relations Toshiya Hari.

Additionally, Nvidia addressed three key issues for investors "that have been holding back the stock over the last year," Arya said.

For one, the full-on ramp of its Blackwell AI platform is "currently well on track," he said, making up about 70% of its compute sales in the fiscal first quarter. Meanwhile, the company's next-generation Blackwell Ultra chips are expected to start production in the fiscal second quarter, then ramp in the second half of the year.

See also: China's AI industry is booming. Can Nvidia and other U.S. companies still get in on it?

Arya noted that Nvidia's management expects the transition to Blackwell Ultra to be an easy one, with "limited associated ramp-up costs."

Meanwhile, its China business "is now fully derisked," Arya added, and the company has no sales to Chinese customers in its current data-center revenue forecasts. Even if Nvidia releases another product for the Chinese market after the U.S. banned it from selling its H20 chips, those sales will be incremental, Arya said. And Nvidia has other opportunities now in sovereign AI, since President Donald Trump has pulled back on implementing the Biden administration's AI diffusion rules.

Bank of America maintained its buy rating on Nvidia's stock, which Arya said is a top sector pick with a price target of $180. While the stock has been in recovery mode and is closing in on its record high, the BofA team sees nearly 27% more upside from current levels.

The analysts "believe [Nvidia] remains best positioned to benefit from the ongoing AI tide, supported by a multiyear lead in performance (AI scaling), pipeline, incumbency, scale and developer support," Arya said.

-Britney Nguyen

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

June 05, 2025 14:24 ET (18:24 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.