Nvidia stock has 2x good news.
Semiconductor star Nvidia (NVDA 3.55%) It soared Thursday morning, rising nearly 5% before falling back to a nearly 3% gain as of 11:11 a.m. ET. According to CNBC, there’s no big mystery as to why. Demand for Nvidia’s new Blackwell chips for artificial intelligence (AI) capabilities has become an “extraordinary situation,” the CEO said, citing comments on the network’s “Closing Bell: Extended Broadcast.” Jensen Huang was quoted as saying.
Oh, and Blackwell is still scheduled to launch in Q4, which is still a few months away.
This good news has a (positive) ripple effect for Nvidia’s contract chip manufacturing company, Taiwan Semiconductor Manufacturing. (TSM 2.28%)increased by 2%. However, the impact is less beneficial for Nvidia’s rival Intel. (INTC -0.62%). The stock is still down 0.9% after suffering a 3.3% loss earlier in the day.
rich in catalysts
As reported by TheFly.com, investment bank JPMorgan yesterday commented on how Blackwell will boost NVIDIA, saying this new chip will add “billions” of dollars to NVIDIA’s sales in the fourth quarter. I predicted that it would be added. As production rates increase, so should sales, bringing in billions more for Nvidia and TSMC.
But it’s not the only catalyst at work today. Yesterday, OpenAI announced that it had raised $6.6 billion in new funding “to accelerate progress” in AI software. OpenAI specifically said that some of this funding will go toward “improving computing power” (i.e., possibly buying AI chips from Nvidia and TSMC doing the heavy lifting).
In addition to the additional revenue these two companies will receive from OpenAI’s chip purchases, Nvidia will also benefit from the increased valuation of its investor, OpenAI itself. This latest funding round increases OpenAI’s private market value to $157 billion, according to a previous report.
Is Nvidia stock a buy?
So what does this mean for Nvidia stock? Now, Nvidia will next report earnings on November 19th, and the outlook is positive. Analysts surveyed by S&P Global Market Intelligence expect GAAP earnings to rise more than 75% to $0.65 per share. Sales are expected to increase 82% to $32.9 billion.
But what investors are really looking forward to is what NVIDIA’s forecast will be in its Q3 report for the fourth quarter, especially given the comments from JPMorgan and Hwang himself. For now, analysts think earnings growth will slow to just 43%, but if Blackwell’s sales grow above that number, things could look really positive for NVIDIA stock going forward. There is sex.
Is TSMC stock worth buying? So what about Intel?
Good news for Nvidia could also be good news for Taiwan Semiconductor. And since TSMC stock sells at a much lower valuation than Nvidia (31x price-to-earnings ratio compared to 56x), TSMC is able to capitalize on Nvidia’s “insane” growth rate. Might be a smart strategy to use. It also doesn’t hurt that TSMC makes chips for many semiconductor companies other than Nvidia, including Intel. Therefore, if for some reason Blackwell’s growth slows or its growth does not go as planned, the impact on TSMC’s earnings will likely slow down.
In this respect, diversification can be a virtue.
Given all this, I don’t think there’s much reason to be optimistic about Intel. With a very high price-to-earnings ratio of 93 times, it is the most expensive chip stock among the three companies, and it appears to be steadily losing ground to its biggest rival, Nvidia. With Blackwell arriving on schedule in the fourth quarter, I fear the situation will only get worse for Inter.
JPMorgan Chase is an advertising partner of The Motley Fool’s Ascent. Rich Smith has no position in any stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: November 2024 $24 short calls on Intel. The Motley Fool has a disclosure policy.
