The shares of chip makers NVIDIA (NVDA) and AMD (AMD) are rallying after they were upgraded by Goldman Sachs and Mizuho, respectively.

NVIDIA: NVIDIA was added to Goldman's Conviction Buy List by analyst Toshiya Hari, who expects the company's data center business to benefit from increased demand for machine learning and artificial intelligence. Moreover, potential data center competitors face a high barrier to entry, and new competition in the space should not emerge until the middle of next year or 2018, Hari believes. He now expects NVIDIA's data center revenue to jump 99% and 53% in fiscal 2018 and fiscal 2019, respectively, versus his earlier estimates of 50% and 34% increases. Meanwhile, the company's revenue from games should be boosted by virtual reality, growth in the number of gamers,and new products in the sector, the analyst stated. He now expects NVIDIA's gaming revenue to increase 20% and 28% in fiscal 2018 and fiscal 2019, respectively, up from 16% and 20% previously. Hari raised his price target on the shares to $129 from $92.

AMD: AMD should benefit from the proliferation of deep learning and increased demand for its graphic processing units, or GPUs, wrote Mizuho Securities analyst Vijay Rakesh, who upgraded the stock to Buy from Neutral. Deep learning and artificial intelligence are starting to gain momentum, creating an opportunity for AMD's Radeon GPU for deep learning and its Zen products for servers, Rakesh stated. The analyst thinks that stronger sales of these products could raise the company's gross margins by above 60% from current levels in the second quarter of next year. The analyst raised his fiscal 2017 estimates for the company slightly, but he increased his fiscal 2018 EPS estimate for the company to 14c from 2c, citing its opportunity in GPU and data centers. He placed a $13 price target on the shares. In the same note, Rakesh, who said NVIDIA has solid traction in the initial Deep Learning space with GPUs and parallelism, raised his price target on its shares to $115 from $80, adding that while Intel (INTC) is a "late starter" and behind NVIDIA, it should also be a beneficiary of GPUs in the data center.

PRICE ACTION: In morning trading, NVIDIA rose 3.7% to $105.38 and AMD jumped 4% to $11.40. Over the last three months, NVIDIA has jumped 67% while AMD shares have advanced about 85% over the same period.