Nvidia (NVDA) remains at the center of Wall Street's AI conversation, with Morgan Stanley’s latest report reinforcing confidence in the chipmaker’s short- and long-term prospects. At the same time, U.S. retail investors are piling into AI-related stocks, helping fuel one of the strongest bursts of trading activity since 2018.
Morgan Stanley Reaffirms Nvidia's AI Outlook
Following meetings with Nvidia management, Morgan Stanley analysts led by Joseph Moore reiterated an "overweight" rating on the stock, with a price target of $210 per share. That implies a market capitalization of roughly $5.1 trillion, underscoring the firm’s conviction that Nvidia will remain the dominant supplier of GPUs powering the AI boom.
The report highlights that cloud capital expenditures remain the primary driver of Nvidia’s revenue growth, as computing workloads shift from CPUs to GPUs. While transformative AI applications are still in their early stages, Nvidia sees strong momentum across emerging areas such as healthcare, legal services, and industrial automation.
Moore added that robotics and automation could represent the next major growth wave, with the AI infrastructure market potentially reaching $3 trillion to $5 trillion by 2030.
Supplier Financing and Strategic Investments
The report also addressed Nvidia’s financing partnerships, including its collaboration with OpenAI. Moore described these arrangements as "demand accelerators" rather than demand creators, designed to speed up innovation and expand data center capacity.
Nvidia’s investments in companies like CoreWeave and partnerships with sovereign wealth funds reflect a strategy of building leverage points across the AI ecosystem. Despite rising competition from AMD (AMD-US), Nvidia management remains confident that cloud providers will continue to rely heavily on its GPUs.
Retail Investors Pile Into AI Stocks
Beyond institutional confidence, retail enthusiasm has surged. A Citigroup report shows retail trading activity has hit its highest level since 2018, breaking the usual October lull. JPMorgan Chase data indicates retail stock purchases reached $7 billion per week in early October, well above the two-month average of $5.3 billion.
AI-related names are leading the charge. Dell (DELL-US) saw its largest inflows in five months, while Tesla (TSLA-US), Nvidia, and Meta (META-US) remain top retail favorites. According to 22V Research, Goldman Sachs’ retail investor basket has climbed about 20% since September, with technology stocks accounting for more than three-quarters of the gains.
Still, strategists caution that momentum may be overextended, particularly in niche areas like quantum computing, where a pullback could weigh on broader indexes.
Earnings Season Could Support Year-End Gains
Despite a sharp sell-off on October 10, when all three major indexes fell and the Nasdaq dropped more than 3%, some strategists remain upbeat. Saira Malik, CIO of Nuveen Asset Management, expects the fourth quarter to remain strong, supported by corporate earnings.
Analysts forecast S&P 500 profits to grow 7.4% in Q3, the slowest pace in two years, but Malik argues that the tech rally is being driven more by earnings growth than valuations. She emphasized that a handful of large-cap companies with dominant AI positions and stable profits are key to sustaining momentum.
The Bottom Line
Between Morgan Stanley’s bullish stance on Nvidia and the surge in retail investor enthusiasm for AI stocks, the market narrative heading into year-end remains focused on artificial intelligence. While risks of over-concentration exist, strong corporate earnings and continued demand for GPUs suggest that AI will remain the defining theme for both institutional and retail investors alike.