Nvidia (NVDA) -) shares extended gains Tuesday following reports that the AI-leading tech group is looking to take on Intel (INTC) -) in the market for personal computing chips.
The stock was also given support from a Securities and Exchange Commission filing that indicated a U.S. government ban on the sale of high-tech chips to China came into effect sooner than anticipated, but would not likely impact its near-term earnings.
Reuters reported late Monday that Nvidia will use technology from Arm Holdings, the U.K. chipmaker that listed on the Nasdaq earlier this autumn, to design CPUs that will run the Microsoft (MSFT) -) operating system. Nvidia was one of Arm's biggest financial supporters heading into the September IPO and tried to buy the group before being thwarted by regulators in the U.K. last year.
Advanced Micro Devices (AMD) -) was also named as another chipmaker tied to Arm that will use the group's technology to design central processing units, or CPUs, for windows-based PCs.
Reuters reported that both companies could begin selling the chips as early as 2025 in what would amount to a major challenge to Intel's fading market dominance, which was hit by Microsoft's decision to start using Qualcomm (QCOM) -) made chips in 2016.
Microsoft has also been looking to further imbed its AI-powered Copilot software into Windows, a move that will require the kinds of AI chip technologies that Nvidia deploys.
"We highlight that developing an all-encompassing CPU for the enterprise space is no easy task, but we think Nvidia has the potential to be successful and can take incremental share from 2025 to 2030," said Angelo Zino, vice president and senior equity analyst at CFRA Research. "PCs focused specifically on the gaming space could be a potential opportunity for a NVDA-designed ARM-based CPU."
Nvidia shares, which closed 3.84% higher on Monday, were marked 0.32% higher in late-morning trading to change hands at $430.85 each.
Nvidia, the world's biggest AI chipmaker, forecast current quarter revenues of around $16 billion in August when it published stronger-than-expected second quarter earnings and later unveiled an make it easier for clients to run AI applications on Google Cloud (GOOGL) -) using Nvidia-made chips with deeper integration between hardware and software offerings.
Goldman Sachs analyst Steven Kron recently added Nvidia to the bank's 'Americas Conviction List', a step up from the 'buy' rating it assigned to the stock in late August, while holding its price target in place at $605 per share.
"Look for Nvidia to maintain its statues as the accelerated computing industry standard for the foreseeable futures given its competitive moat and the urgency with which customers are developing and deploying increasingly complex AI models," Goldman argued.
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