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Analyst Reset Nvidia Share Price as Chip Market Grows in the AI Boom

The surging demand for AI has propelled chip stocks to record highs, with one Wall Street analyst offering insights on this trend. Nvidia shares continued their recent gains on Tuesday, leading a broader rally in the crucial chip sector, following an in-depth analysis from KeyBanc Capital Markets on the prospects for chip stocks.

Nvidia (NVDA), which accounted for about a third of the S&P 500’s first-half gains, has been the main beneficiary of the AI investment boom. This surge has reshaped the chip sector, adding nearly $2 trillion to its overall market value. The demand for Nvidia’s top-tier processors and semiconductors, along with the excitement around its new Blackwell system, has propelled the company to become one of the world’s largest, with a market value of $3.1 trillion.

This momentum has also boosted other chipmakers like Advanced Micro Devices (AMD) and Micron Technology (MU), leading to significant first-half gains. The Philadelphia Semiconductor Sector Index, a key industry benchmark, has soared over 38% this year, more than double the S&P 500’s advance. The chip index reached a record 5,826.16 points early in Tuesday’s trading.

KeyBanc’s lead sector analyst, John Vinh, predicts that AI demand will continue to drive further gains throughout the year and beyond, despite challenges in China and the auto sector. Vinh notes that “server supply chain feedback indicates that traditional server demand continues to improve.” In a Tuesday note, he adjusted price targets and issued ratings upgrades for various sector stocks.

“Most of the demand is driven by major U.S. cloud providers, with server partners reporting increasing demand from Meta and Microsoft. We’re also seeing sustained demand from Chinese cloud-service providers and moderately improving demand within enterprise,” Vinh said.

These major cloud providers, including Google parent Alphabet and Amazon, are set to invest around $92 billion this year alone to expand their extensive computing infrastructure. This investment reflects their clients’ efforts to leverage datasets to boost sales in sectors ranging from drive-through dining to advanced pharmaceutical testing services.

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