Nvidia stock (NVDA) traded higher on Friday as investors looked past reports that one of the company’s largest customers is stepping up development of its own artificial intelligence processors.
The stock was up about 2.3% at around $207 at the time of writing after trading lower in premarket activity.
Meta advances custom AI chip efforts
The latest development came after Reuters reported that Meta Platforms plans to begin manufacturing a new in-house artificial intelligence chip from September, citing an internal company memo.
The processor, code-named “Iris,” forms part of Meta’s multi-generation Meta Training and Inference Accelerators (MTIA) program and is intended to support the artificial intelligence systems powering Facebook and Instagram.
According to Reuters, testing of the chip took six weeks and uncovered no major issues, marking progress for an initiative that has faced challenges since it began more than five years ago.
The report said Meta is working with Broadcom on the chip’s design, while Taiwan Semiconductor Manufacturing Co. will manufacture the processors.
Meta’s goal is to lower its computing costs and reduce dependence on third-party chip suppliers by using silicon tailored to its own workloads.
However, Reuters reported that the new chip is intended to augment, rather than replace, the large volumes of graphics processing units Meta continues to purchase from Nvidia and Advanced Micro Devices.
Meta has previously introduced several generations of MTIA chips and has said they could eventually replace GPUs in some servers while expanding into AI training workloads.
To date, custom chips have primarily been used for inference, the process of generating responses from trained AI models.
Competitive pressure continues to build
The report represents another example of a broader trend across the artificial intelligence industry, where major technology companies are increasingly investing in custom silicon to optimize performance and reduce infrastructure costs.
While those efforts have raised concerns about Nvidia’s long-term market share, custom processors have so far complemented rather than displaced the company’s graphics processors in many large-scale AI deployments.
Nvidia continues to dominate the market for AI accelerators, particularly for training frontier models, even as hyperscalers pursue greater control over portions of their computing infrastructure.
Wall Street remains constructive
Morgan Stanley reiterated its Overweight rating and $288 price target on Nvidia following the company’s recent non-deal roadshow with senior executives.
The investment bank said 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 within the semiconductor sector.
Earlier this week, TD Cowen reaffirmed its Buy rating and $275 price target after meeting with Chief Executive Officer Jensen Huang, Chief Financial Officer Colette Kress, and Head of Investor Relations Toshiya Hari.
According to the brokerage, Nvidia executives said demand for AI computing infrastructure remains strong, pointing to constrained compute availability, rising rental prices for legacy GPUs, expanding enterprise AI adoption, and cloud agreements signed at premium pricing.
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