Buy dip.
This thinking around semiconductor stocks emerged this week as investors scooped up battered stocks and pushed Nvidia’s stock to record highs. Taiwan Semiconductor’s (TSM) strong outlook falls on the wall as growing confidence in the AI boom overshadows a weaker outlook for chip supplier ASML and reports of caps on exports of advanced AI chips to some Middle Eastern countries. It was enough to reignite the city’s enthusiasm for AI.
Nvidia closed this week above $138 per share, giving it a market value of $3.39 trillion. It is now the second largest company in the world after Apple. But that may not last long. Experts I spoke with last week said there was growing confidence that the semiconductor giant would become the first Big Tech company to reach a valuation of $4 trillion.
“There’s no question about that,” Lumida Wealth Management CEO Ram Ahluwalia told me on Yahoo Finance’s Catalysts. “GPU chips are in high demand and early adopters are starting to see some ROI.”
Nvidia CEO Jensen Huang earlier this month said demand for Blackwell’s new chips was “insane,” fueling a rally in the company’s stock price.
Tony Wang, a portfolio manager at T. Rowe Price, said that despite the stock’s dramatic outperformance, investors still “continue to underestimate” NVIDIA’s growth potential. Ta. He believes it is “definitely possible” that the semiconductor giant will be the first to cross that $4 trillion threshold due to “exceptional” demand for AI.
In the coming weeks, earnings from the same Magnificent Seven companies will give investors better insight into NVIDIA’s market power. Meta (META), Amazon (AMZN), Alphabet (GOOG, GOOGL), and Microsoft (MSFT), which account for more than 40% of chipmaker revenue, have all pledged to continue investing in AI.
Spending by Meta, Alphabet and Microsoft totaled more than $40 billion last quarter, and Amazon said spending in the second half of this year is likely to exceed the $30 billion in the first half.
BofA analyst Vivek Arya sees Nvidia as a “generational opportunity,” but one of the reasons he sees Nvidia “strengthening its position” is because of top hyperscalers. It cites comments on capital expenditures.
Aria raised his price target on the chipmaker this week to $190, suggesting an upside of nearly 40% from Friday’s closing price.
Arya and his team also cited the solid demand outlook for Taiwanese semiconductors as a positive. TSMC, a top supplier to other major companies including Nvidia and Apple, said it expected third-quarter net profit to rise more than 50% and full-year sales to rise nearly 30%, leading to sector-wide gains. caused a rise.
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It’s no exaggeration to say that Big Tech’s third-quarter numbers will be an important test for Nvidia and will be key to the stock’s momentum in the near term. Any disappointment in AI spending plans could lead to volatility for Nvidia and the broader chip market.
But if that happens, the decline may not last long. Niles Investment Management founder Dan Niles recently said on Yahoo Finance’s Opening Bid Podcast that he remains bullish on NVIDIA’s long-term prospects.
“We need several more years of AI investment before we reach saturation or the AI landscape becomes more mature,” Niles says. “I think Nvidia’s revenue will double over the next few years. I also think the stock price will double over the next few years.”
Nvidia stock is up 21% so far this month, and is up 179% since the beginning of the year.
Seana Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Have a tip about a deal, merger, activist situation, or more? Email seanasmith@yahooinc.com.
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