MW This common worry about Nvidia is 'laughable,' Morgan Stanley says

By Emily Bary

A Morgan Stanley analyst doesn't think we're in an AI bubble - and expects Nvidia to benefit from robust inference demand for the foreseeable future

Worried about Nvidia Corp.'s sales potential going forward? Morgan Stanley analyst Joseph Moore isn't.

While some might be concerned that customers will need to pare back artificial-intelligence hardware budgets as they work to digest current inventories, Moore shrugged that fear off in a Friday note to clients.

"The idea that we are in a digestion phase for AI is laughable given the obvious need for more inference chips which is driving a wave of very strong demand," he wrote.

Nvidia's $(NVDA)$ graphics processing units are used both to train AI models and to let those models draw conclusions based on new information, a process known as inference. "Inference demand is explosive, which we believe should be durable," Moore said in his report.

Read: AMD's AI story was already 'tenuous,' and now the stock has new challenges

Investors these days aren't exactly negative on Nvidia's stock, according to Moore, but they do seem nervous about this prospect of this "inevitable" digestion.

"Those who want to see this as a bubble are manifesting that through the various conversations about longer term data-center leases, but it's hard to have that view when you talk to actual customers about actual demand which remains strong," he wrote.

Moore isn't concerned about potential data-center lease slowdowns, saying it's not surprising that customers might be moving some of their spending around as they change which large language models they support.

Moore boosted his calendar 2026 revenue estimate by 10.7% and his calendar 2026 earnings estimate by 11.9%, calling both new figures "likely very conservative."

"We are hearing about demand levels that are tens of billions above current run rates, limited by supply," he wrote. "Obviously that can change with a shifting economic backdrop, but the fact that the strength is coming from the revenue generating part of the AI business - inference - we don't expect that."

Nvidia's stock is up about 4% in Friday afternoon trading. It's down 22% so far this year.

See more: These 15 tech stocks could rocket up to 85% in a year - and analysts love them

-Emily Bary

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

April 25, 2025 13:59 ET (17:59 GMT)

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