Nvidia has struck major deals in Europe. Will this market become a new source of growth

Technology giant Nvidia has announced a number of partnerships with European countries and companies in the field of artificial intelligence. The chipmaker, which has become the main beneficiary of the AI boom, is facing several threats at once and is therefore looking for new markets to maintain its leading status.

Nvidia at a conference in Paris on June 11 announced a series of deals and partnerships with European governments, cloud and telecom companies that aim to strengthen infrastructure for artificial intelligence. One of the key projects is a joint cloud platform with French startup Mistral that leverages 18,000 Nvidia Grace Blackwell chips, reports CNBC. And in the UK, thousands of Nvidia chips will be used on platforms from Nebius Group NV (headed by Yandex co-founder Arkady Volozh) and Nscale Global Holdings, reported Bloomberg.

Nvidia announced the partnerships during the European tour of its CEO Jensen Huang. Prior to Paris, he also spoke in London. Huang said that Europe needs to build up its data center infrastructure to keep up with global leaders in AI. Now European countries are inferior to the United States both in the level of investment and the scale of technology deployment, Bloomberg notes.

«Every industrial revolution starts with infrastructure. AI is as much the backbone of our time as electricity or the internet used to be,» said Huang. But Europe has finally realized the strategic importance of AI datacenters, and its computing power in this area will grow tenfold in the next two years, he predicted.

Nvidia, as one of the main beneficiaries of the AI boom, is looking for new markets to maintain its leadership in artificial intelligence hardware, noted CNBC. This is especially important amid U.S. export restrictions that have caused the company to lose revenue in China, the channel said.

Nvidia aims to expand its international footprint and build itself into the AI infrastructure on a national level: to position itself as a company that helps countries and governments build data centers using its GPUs to unlock the potential of AI to benefit local economies and communities, CNBC writes.

Of great importance to Nvidia in Europe is the principle of «sovereign AI,» whereby data centers and servers serving users in the European Union are located in the EU, not abroad, CNBC noted.

«I'm here to make it possible for every country to have its own sovereign AI. AI starts with data. You need to take that data. Don't export it. Just buy the machine,» Huang said in a statement to Bloomberg.

Right now, about half of Nvidia's sales come from AI gas pedals used by the world's biggest companies, including Microsoft and Meta. But Nvidia wants to break into a broader market by promoting the use of smaller-scale systems by businesses and governments, Bloomberg added.

Nvidia's biggest customers, including Microsoft and Meta, are also developing their own chips and AI solutions that don't yet compete with Nvidia's chips but could eventually prove cheaper and more affordable than its other products, which could dampen the flow of new orders from key partners, analyst Jay Goldberg of Seaport Global warned. He's the only one now advising a selloff in Nvidia stock. In addition, chip makers such as AMD and Broadcom will eventually be able to impose competition on the company, Goldberg warned. He also expects a slowdown in corporate spending on AI infrastructure in general as early as 2026.

By contrast, the biggest optimist about Nvidia on Wall Street - analyst Ivan Feinseth of Tigress Financial - expects the stock to rise more than 50% from current levels (to $220). He's just as confident of sustained demand for the company's GPUs: the Hopper (H100) chips and their Blackwell successors dominate AI datacenters, and demand exceeds supply. If his forecast comes true, the company's market capitalization will be about $5.4 trillion (up from $360 billion at the beginning of 2023).

Nvidia's stock was little changed in trading on June 10the price and is up 7% since the beginning of the year. The vast majority of analysts - 62 out of 69 - advise investors to buy the stock (Buy and Overweight ratings). Another six are neutral, and only one advises selling. Wall Street's consensus target price of $171.5 suggests the company's stock is up another 20% from its June 10 close.