According to UBS, software companies like Microsoft (NASDAQ:MSFT) are at risk of being limited by GPU supply, potentially affecting their ability to generate revenue from AI projects next year.
In an investor note, analyst Karl Keirstead wrote, “Microsoft and other companies are facing a constrained supply of Nvidia (NVDA) GPUs. While we have discussed the upside opportunity of AI, we also need to consider the risk that Microsoft may not have sufficient access to GPUs to meet its projected Copilot revenue growth and fulfill the AI ambitions of its customer base.”
Keirstead, who has a buy rating and a $400 price target on Microsoft (MSFT), also mentioned Amazon (AMZN) and Adobe (ADBE) as potential companies impacted by the GPU constraints.
In July, Microsoft (MSFT) announced its plan to invest around $50 billion in fiscal 2024, indicating a significant AI capacity expansion. However, the GPU supply shortage has already started to show its effects, as seen in Super Micro Computer’s (SMCI) recent earnings report.
“While Nvidia’s recent performance provides some reassurance that it’s addressing its supply chain issues, this remains a risk that investors should thoroughly evaluate,” added Keirstead. “GPU capacity constraints are not just hypothetical events but a real possibility.”
Pre-market trading on Tuesday showed Microsoft (MSFT) shares slightly lower.