Nvidia Chip Stock Surges Amidst Tech Rebound, But Analyst Sees Volatility Ahead
Nvidia’s stock price surged over 5% on Thursday, joining a broader tech market rebound. However, despite the recent rally, analysts remain cautious, citing potential volatility in the coming weeks as the chip giant prepares to report its earnings later this month.
While Nvidia’s shares enjoyed a 6% gain on Wednesday, the company remains slightly underperforming the Philadelphia semiconductor index (SOX). This comes after a period of struggle for Nvidia, which began after its stock reached a new high on June 20th and then closed on a low.
VC Arya, Senior Research Analyst at BVA Securities, believes the market volatility is not directly related to the semiconductor sector but rather to the ongoing AI boom. "This is where all the gains were because AI was the best game in town," he explained. "That’s why these companies saw the most drawdown during this volatility."
Despite the market fluctuations, Arya remains bullish on Nvidia’s fundamentals. "Every one of Nvidia’s top customers – whether it is Amazon, Meta, Microsoft, or Google – they all said they are investing more, not less in AI," he highlighted. He also pointed to strong outlooks from key suppliers like Taiwan Semiconductor and system partners like Super Micro as evidence of a healthy demand environment.
One potential concern for Nvidia is the rumored delay in its new Blackwell chip. While Arya acknowledges that some versions of Blackwell may be pushed out by a quarter or so, he believes the overall demand for Nvidia’s products remains strong and that these delays will likely result in "sales delayed, not sales denied."
Looking beyond Nvidia, Arya highlighted AMD’s strong performance, fueled by Intel’s struggles in the cloud computing space. He believes Intel’s lagging in AI investments and manufacturing capabilities could lead to continued share losses in the coming quarters.
Meanwhile, Arya emphasized the importance of domestic chip manufacturing and the role of government initiatives like the CHIPS Act in reducing dependence on Taiwan. He acknowledged the complex situation, stating, "It will have to be some combination of Taiwan Semi, Samsung, and Intel because these are really the three companies that know how to do leading-edge processors."
Despite the optimism surrounding the long-term prospects for the semiconductor industry, analysts remain cautious about Nvidia’s immediate future. The upcoming earnings report, scheduled for later this month, will be crucial in shaping investor sentiment and determining if the recent rally can sustain itself.
Nvidia Stock Surges on AI Hype, But Experts Warn of Volatility
Nvidia’s stock price jumped over 5% on Thursday, riding a wave of optimism in the tech sector. The surge came amidst a broader market rebound, but analysts remain cautious about the chip giant’s long-term prospects, citing concerns over potential delays in its next-generation Blackwell chip and a recent history of underperformance compared to the broader semiconductor index. While the company’s core AI technology continues to drive demand, potential headwinds could create near-term volatility.
Key Takeaways:
- Nvidia’s surge is part of a broader tech market rebound. However, the stock’s week-long performance lags behind the Philadelphia Semiconductor Index (SOX).
- The potential delay of the Blackwell chip could impact Nvidia’s near-term earnings. This uncertainty, coupled with the already volatile semiconductor market, could lead to further stock fluctuations.
- Despite the concerns, the underlying fundamentals for Nvidia remain strong. Major customers like Amazon, Meta, Microsoft, and Google are all increasing AI investments, and Taiwan Semiconductor Manufacturing Co. (TSMC), a key Nvidia supplier, recently delivered strong guidance.
- Nvidia’s valuation remains attractive compared to other tech giants. The stock trades at a lower multiple of earnings growth than many of its peers, suggesting further potential for growth.
- Intel continues to struggle to compete in the AI market. The company’s manufacturing delays and lack of timely investment in AI technologies continue to hinder its progress, offering an opportunity for competitors like AMD and Marvell to gain market share.
- The US government’s drive for domestic chip manufacturing could benefit both Intel and Nvidia. The CHIPS Act aims to bring semiconductor production back to the US, potentially benefiting companies like Taiwan Semiconductor Manufacturing Co. (TSMC), Samsung, and Intel. However, Intel’s lagging position in the race to produce leading-edge processors and its dependence on external partners could limit its ability to capitalize fully on this opportunity.
Continued Demand for AI Drives Nvidia’s Growth
VC Arya, a Senior Research Analyst at BVA Securities, attributes Nvidia’s recent stock jump to the rising demand for AI technology. "Every one of Nvidia’s top customers, whether it is Amazon, Meta, Microsoft, or Google, they all said they are investing more, not less, in AI," states Arya. He adds that the company’s strong fundamentals are further supported by positive outlooks from key suppliers and partners, such as TSMC and Super Micro.
Blackwell Chip Delays Add a Layer of Uncertainty
Despite the positive outlook, Arya acknowledges concerns regarding the potential delay of the Blackwell chip. "If we take a step back, we have to separate what’s happening in the market from the fundamental side," he says. "I think what’s happening in the market and the volatility has nothing to do with semis, but this is where all the gains were because AI was the best game in town. And that’s why these companies saw the most drawdown during this volatility."
Arya believes the delay in Blackwell is likely to be minimal and will ultimately result in "sales delayed" rather than "sales denied." "If we look at demand for Nvidia’s Hopper product, which is the product before Blackwell, demand for that is off the charts right now, and that’s what we heard from Super Micro," he explains. "They got it well above consensus, and a lot of that is actually based on the hopper product."
Intel’s Struggles Present Opportunity for Competitors
While Nvidia continues to navigate the AI landscape, Intel faces increasing pressure from competitors like AMD. Arya points out that Intel’s delayed investments in AI technologies and manufacturing challenges have left it behind in the race for market share. This challenges the company’s ability to compete effectively in the cloud computing space, a key growth sector for AI.
"They did not invest at the right time," says Arya, referring to Intel. "They’re still trying to catch up on the manufacturing side. So I think they have a tough few quarters ahead of them, and they really need the broader enterprise market, the China market, and the PC market to recover."
Future Outlook: A Balancing Act Between Optimism and Caution
While the future outlook for Nvidia remains bright, the possibility of further market volatility stemming from Blackwell delays cannot be ignored.
The company’s strong fundamentals, coupled with the ongoing growth in AI technology, provide a strong foundation for long-term growth. However, analysts will be closely watching Nvidia’s upcoming earnings report, where the company is expected to provide more clarity regarding Blackwell’s impact on its financial performance.
The semiconductor industry itself is expected to remain volatile for the foreseeable future. The global economic climate, ongoing supply chain disruptions, and the US government’s push for domestic chip production will continue to influence the sector’s trajectory.
As a result, investors will need to carefully weigh the inherent risks against Nvidia’s potential for continued growth, driven by its dominant position in the rapidly expanding AI market.
