(Bloomberg) — Nvidia Corp. investors have hopes are high that Monday's speech by CEO Jensen Huang will trigger a fresh break in the chipmaker's shares, which ended at their first record low since November.
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Huang is set to take the stage Monday night at the closely watched CES trade show in Las Vegas. Nvidia has typically used the event to showcase consumer devices using its chips. However, investors will focus today on any commentary on the Blackwell chip, which is seen as Nvidia's next big growth driver. Despite seeing robust demand, Blackwell has faced supply constraints in part due to manufacturing challenges that have slowed its rollout.
“The expectation is that demand for Blackwell remains very strong,” said Matt Cioppa, portfolio manager at Franklin Templeton Equity Group. “That could bring the ultimate longer-term opportunity for Nvidia back into focus for the market.”
Investors have reasons to be optimistic. Over the past six months, Huang's comments about demand for the chips have boosted the stock. In October, he called Blackwell's demand “crazy,” and in November he said the chips were being shipped in the current quarter amid “very strong” demand.
The shares posted a monthly loss in December, but were still up 171% in 2024, making them by far the biggest single driver of the S&P 500's overall gain. The stock is already up 11% this year, including an increase of 3.4% on Monday. With a market capitalization of $3.66 trillion, it is close to overtaking Apple Inc. as the largest company; The iPhone maker has a market cap of $3.7 trillion.
Disappointment Earnings
Yet the stock fell briefly after Nvidia's Nov. 20 earnings report. The company's revenue forecast failed to impress Wall Street, which had become accustomed to projections that topped average estimates by a significant margin.
The lull in the shares has come as excitement over AI spending has spread to other areas of the semiconductor industry.
The shares of Broadcom Inc. has risen more than 30% in the past few weeks after the chipmaker projected a boom in the market for AI components it designs for data center operators. The shares of Marvell Technology Inc. has rallied more than 20% since it reported better-than-expected earnings on demand for its custom AI chips.
Morgan Stanley analysts led by Joseph Moore compared the rallies in those stocks to a transfer of wealth from Nvidia, whose shares sank for four consecutive days in the wake of the Broadcom report, losing more than $200 billion in market value.
Nvidia remains a top pick at Morgan Stanley, with analysts arguing that the chip maker will take market share this year. They also look to Huang's keynote to be a “positive event.”
“The messages should be the same – Blackwell demand is exceptional, but supply is limited,” they wrote in a research note last month. “By the middle of the year we remain comfortable that the focus will remain on Blackwell, which is the driving force behind revenue” in the second half of the year.
High Points
Jordan Klein, an expert in the technology sector at Mizuho Securities, sees the CES event and Huang's keynote as tests of near-term sentiment and risk appetite towards technology.
If the stock drops or treads water in the days following Huang's comments, that “would be a moderate negative in my view for January,” he wrote. Since tech earnings season doesn't start until later this month, “investors will have little to gauge fundamentals and prospects until then,” he said.
The stakes for Nvidia shares may be higher, as its 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 at close to 35 times estimated earnings, compared with about 24 for the Philadelphia Stock Exchange Semiconductor Index.
Emily Roland, co-chief investment strategist at John Hancock Investments, remains bullish on Nvidia and other big tech stocks, but is bracing for “a lot more turmoil” ahead.
“At some point there will be a 'show me' moment in 2025 that will have to restate the story,” he said. “Valuation is clearly an issue, and it's important to note how stretched the valuation is, even if the AI winds are still intact.”
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Earnings due Monday
(Updates with closing share price in fifth paragraph)
