Nvidia (NVDA) shares climbed approximately 2.3% on Friday, trading near $207, as the market looked past news that major customer Meta Platforms is accelerating its custom AI chip development. The move reversed early premarket losses, reflecting investor confidence that Nvidia's dominant position in AI accelerators remains intact.
Meta's Custom Chip Plans
Reuters reported that Meta plans to begin manufacturing a new in-house AI processor, code-named 'Iris,' starting in September. The chip is part of Meta's multi-generation Meta Training and Inference Accelerators (MTIA) program, designed to power AI systems behind Facebook and Instagram. Testing reportedly took six weeks with no major issues, marking progress for an initiative that has faced hurdles since its launch over five years ago.
Meta is collaborating with Broadcom on the chip's design, while Taiwan Semiconductor Manufacturing Co. will handle production. The goal is to lower computing costs and reduce reliance on third-party suppliers by using silicon tailored to Meta's specific workloads. However, the new chip is intended to augment, not replace, the large volumes of GPUs Meta continues to purchase from Nvidia and AMD.
Competitive Landscape
Meta's move is part of a broader trend among hyperscalers investing in custom silicon to optimize performance and cut infrastructure costs. While such efforts have raised concerns about Nvidia's long-term market share, custom processors have so far complemented rather than displaced Nvidia's GPUs in large-scale AI deployments. Nvidia remains the dominant player in AI accelerators, particularly for training frontier models.
For more on the competitive dynamics, see Nvidia's AI Chip Dominance Faces Growing Threat from Startups and Big Tech Rivals.
Wall Street Stays Bullish
Analysts remain constructive on Nvidia's prospects. Morgan Stanley reiterated its Overweight rating and $288 price target after a recent non-deal roadshow with senior executives. The bank noted that Nvidia conveyed confidence in an accelerating and increasingly diversified growth story that could appeal to both growth- and value-oriented investors. Morgan Stanley also maintained Nvidia as its top pick in the semiconductor sector.
Earlier this week, TD Cowen reaffirmed its Buy rating and $275 price target after meeting with CEO Jensen Huang, CFO Colette Kress, and Head of Investor Relations Toshiya Hari. The brokerage reported that Nvidia executives highlighted strong demand for AI computing infrastructure, citing constrained compute availability, rising rental prices for legacy GPUs, expanding enterprise AI adoption, and cloud agreements signed at premium pricing.
Broader Market Context
Nvidia's Friday gain comes amid a mixed backdrop for AI stocks. While the company continues to benefit from robust demand, some investors are rotating into memory and infrastructure plays. For more on recent sector rotation, see Nvidia Lags AI Peers as Rotation to Memory, Infrastructure Plays Accelerates.
Additionally, Nvidia's partnerships remain a key growth driver. The company's collaboration with Penguin Solutions highlights ongoing AI demand, as discussed in Penguin Solutions Surges 18% on Record Revenue, AI Demand, and Nvidia Partnership.
This article is for informational purposes only and does not constitute financial advice.
