Nvidia Investors Hope CES Keynote Sparks Fresh Breakout
Strong Demand for Blackwell Chips
Despite facing supply constraints due to manufacturing challenges, demand for Nvidia’s next major growth driver, the Blackwell chip, remains very strong. This has sparked optimism among investors, who have seen robust demand for the chips in recent months.
CES Keynote and Blackwell Demand
At this year’s CES trade show in Las Vegas, Huang will take the stage to showcase consumer devices using Nvidia’s chips. Investors will be focused on any commentary on the Blackwell chip, which has been considered Nvidia’s next major growth driver.
Portfolio Manager Weighs In
Matt Cioppa, a portfolio manager at Franklin Templeton Equity Group, believes that demand for the Blackwell chips remains very strong, and this could bring the ultimate longer-term opportunity for Nvidia back into focus for the market. He notes that in the past six months, Huang’s comments about demand for the chips have boosted the stock.
Investors Remain Optimistic
Despite a brief slump after Nvidia’s Nov. 20 earnings report, investors remain optimistic about the company’s prospects. The shares posted a monthly loss in December but still gained 171% in 2024, making them by far the biggest single driver of the S&P 500 Index’s overall gain.
Valuation Concerns
However, the stock’s surge has heightened valuation concerns. The stock trades at 19 times estimated revenue, making it one of the 10 most expensive Nasdaq 100 Index components by this metric. It also trades close to 35 times estimated earnings, compared with about 24 for the Philadelphia Stock Exchange Semiconductor Index.
CES Event and Near-Term Sentiment
Jordan Klein, a tech-sector specialist at Mizuho Securities, sees the CES event and Huang’s keynote as tests of near-term sentiment and risk appetite toward tech. He notes that if the stock drops or treads water in the days following Huang’s remarks, it could be a modest negative for investors.
Earnings Disappointment
Nvidia’s Nov. 20 earnings report failed to impress Wall Street, which had become accustomed to projections that topped average estimates by wider margins. The lull in the shares has come as excitement about AI spending has spread to other areas of the semiconductor industry.
AI Spending and Semiconductor Industry
Broadcom Inc. shares have soared more than 30% in the past few weeks after the chipmaker projected a boom in the market for AI components that it designs for data-center operators. Marvell Technology Inc. shares have rallied more than 20% since it reported better-than-forecast earnings on demand for its custom AI chips.
Wealth Transfer
Morgan Stanley analysts led by Joseph Moore likened the rallies in those stocks to a wealth transfer from Nvidia, whose shares sank for four consecutive days in the wake of Broadcom’s report, shedding more than $200 billion in market value.
Nvidia Remains Top Pick at Morgan Stanley
Despite the recent slump, Nvidia remains a top pick at Morgan Stanley. The analysts argue that the chipmaker will take market share this year and are looking to Huang’s keynote to be a ‘positive event.’
Keynote Expectations
The analysts expect Huang to reiterate his commitment to Blackwell demand being exceptional but supply constrained. By mid-year, they believe Nvidia will have made significant progress in addressing the supply constraints.
Nvidia’s AI Infrastructure Business
Hon Hai Precision Industry Co., the server assembly partner to Nvidia, reported faster-than-expected 15% revenue growth after sustained demand for AI infrastructure. This is a positive sign for Nvidia’s AI infrastructure business.
AI and Tech Trends
In related news, Samsung Electronics Co. is expanding its artificial intelligence push with a new suite of enhancements for its premium TV lineup under the branding of Vision AI. TDK Corp., one of the main suppliers of batteries for Apple Inc.’s iPhones, will this year roll out an improved version of its most advanced product to help mobile devices keep up with the rising power demands of built-in AI.
Earnings Due Monday
No major earnings are expected on Monday, but investors will be keeping a close eye on Nvidia’s stock price in light of Huang’s keynote. The shares closed at their first record high since November last week, and many believe that this could mark the beginning of a fresh breakout for the company.
