Qualcomm (NASDAQ: QCOM) was probably hoping that 2024 would go down as the year of the Snapdragon X Elite processor, as computer makers look for the silicon to power PCs. However, it was reported recently that there have been talks between the AI giant Nvidia (NASDAQ: NVDA) and semiconductor company MediaTek for designing an AI superchip that will rival Qualcomm’s Snapdragon X Elite hardware. Additionally, KeyBanc analyst John Vinh said in a recent research note that he is bullish NVDA stock with a new price target.
Nvidia and MediaTek’s AI Superchip
Nvidia is already the leader of the AI market, but the company has been trying to elbow its way into the burgeoning AI PC market, positioning its RTX graphic cards as the best option out there for AI PCs. Competitors like Qualcomm and Intel (NASDAQ: INTC) have been pushing NPUs with their respective Snapdragon and Ultra chips, but Nvidia is banking on GPUs being just as capable.
On the other hand, MediaTek is best known for building smartphone silicon, and some of those chips have made their way into midrange and budget phones in the United States, but the chip maker has a bigger presence in the Chinese and Indian smartphone markets. MediaTek has also made laptop chips that have appeared in Chromebooks, and already partnered with Nvidia before on automotive tech. Not only that, but the company is actively creating some AI-related products, including AI processors for mobile phone chips.
There are obvious synergies between Nvidia and MediaTek, therefore, it’s no surprise to learn that the two companies are teaming up to create Arm-based chips for laptops. The original claim comes from a Taiwanese site, which adds that the resulting silicon will be larger and more expensive than mobile-optimized Arm (NASDAQ: ARM) chips. Based on reports, the Nvidia-MediaTek chip will be completed sometime in the third quarter of 2024, but we might not see it in action until 2025. Additionally, the chip is rumored to be priced as high as $300 each.
The new chip is expected to use Arm architecture and TSMC’s 3 nanometer process. On the other hand, Qualcomm’s Snapdragon X Elite is based on TSMC’s 4 nanometer process, so this gives an edge to the Nvidia-MediaTek chip, implying better performance and battery life overall. With that being said, working with Nvidia would undoubtedly give MediaTek a great boost, and this partnership would also increase the two companies’ share of the AI hardware market, a market that’s expected to hit around $381.9 billion by 2032, according to Precedence Research.
Therefore, there’s a lot of opportunity there for NVidia. This partnership could be the company’s great entry into the AI PCs market, which would allow it to take market share from its main competitor, Advanced Micro Devices (NASDAQ: AMD).
A Counter to AMD?
In March, AMD CEO Lisa Su highlighted how important AI PCs are going to be and why they’re the future during an interview with CNBC. As an early player in the AI PC market, this might imply that AMD has the edge over Nvidia in the market with its processors. However, Nvidia’s chips are considered superior by most market participants, so it doesn’t really matter that Nvidia entered this market later on.
According to some estimates, Nvidia controls a whopping 95% of the AI chip market, leaving competitors in the dust. Therefore, if it can enter the AI PCs market with great products, it could definitely snatch up a big slice of it as well. This will make Nvidia benefit greatly from that. According to market research firm Canalys, 19% of PCs shipped in 2024 will be AI-capable, and this percentage will grow to 60% by 2027.
Wall Street is Bullish on NVDA Stock
Wall Street’s consensus expectations are for Nvidia to report revenue of $24.51 billion. However, KeyBanc analyst John Vinh is a lot more optimistic. In a recent research note, he wrote that the chip maker will likely report revenue of around $26 billion and give revenue guidance for its second quarter of around $28.5 billion. Also, Vinh maintained a Buy rating and set his price target to $1,200 on NVDA stock, which is an upside of nearly 30% from current trading levels.
Another analyst that’s optimistic about Nvidia’s earnings is UBS’ Timothy Arcuri, who said that Nvidia could deliver April-quarter revenue as high as $26 billion and offered an outlook for this quarter that’s possibly in the $27 billion to $28 billion range. Additionally, in his recent research note, the analyst addresses the well-known debate over the upcoming Blackwell chips, which is whether sales will slow down ahead of the shipment of the new chips as Nvidia’s customers wait for the newest tech to come out.
He thinks that these concerns are generally overblown following recent customer discussions and supply chain work, and that Nvidia’s flagship H100s are still in high demand. He also added that this probably won’t get addressed on this earnings call.
The Bottom Line
Nvidia’s rumored partnership with MediaTek on a new AI superchip will shake up the industry if it comes to fruition, and it’s more the reason to be bullish on NVDA stock. For now, Qualcomm has the edge in the AI PC market as companies like Lenovo (OTCMKTS: LNVGY), Dell (NYSE: DELL) and Microsoft (NASDAQ: MSFT) are already leaning in on the Snapdragon X Elite chipset for laptops coming out this year. Also, now that Qualcomm knows it’ll have competition, there’s some lead time on producing the next generation of AI-based chips.
Still, competition is good because it encourages companies to innovate and chase after the newest things, and Nvidia in particular is a great company because it always seeks to enter new markets and dominate the competition in them. That’s why analysts are bullish on NVDA stock ahead of its upcoming earnings and if Nvidia delivers strong guidance, it could further boost the optimism.
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