Semiconductor stocks surged in Wednesday’s trading session after NVIDIA (NVDA) CEO Jensen Huang emphasized that demand for AI chips is “enormous.” John Vinh, Equity Research Analyst at KeyBanc Capital Markets, joins Morning Brief to discuss the overall state of the AI race and the key players in the space.
After Nvidia rose 8% intraday, Vinh believes the move signals “a recovery based on a kind of overreaction to earnings.” Nvidia’s latest earnings were in line with or beat expectations, but investors hoping for bigger gains were still disappointed.
But Bin doesn’t think AI dealmaking is going to stop anytime soon: “I think what’s really driving the recent recovery is Oracle (ORCL) talking about a very strong growth acceleration in AI, and they’ve also said that in their outlook for next year, they’ll double their capital expenditures. So I think investors are reassured that AI dealmaking isn’t over yet.”
He argues that Oracle is “one of the key names from an AI hyperscaler demand and spending perspective going forward.” He also names AMD (AMD), Marvell (MRVL), and Broadcom (AVGO) as standouts in an “expanding market,” and singles out Cirrus Logic (CRUS) as a lesser-known name. He calls the company an “Apple (AAPL) proxy,” noting that 80% of the company’s revenue comes from Apple. As the tech giant rolls out Apple Intelligence, Cirrus Logic should benefit, especially if it begins an upgrade cycle.
While the AI race shows no signs of stopping, Vinh expects spending “will not slow down” as data centers are a key component. “At least in the short to medium term, we see all these AI hyperscalers having to spend aggressively through 2025,” he explained. “Nvidia is releasing their next-generation platform, Blackwell, which basically reduces the TCO (total cost of ownership) by 30 times.”
“So operationally, if you’re still waiting on a monetization model, if you’re a hyperscaler, you need to adopt the lowest cost TCO solution until that monetization model comes. So, I don’t see a decrease in spend over the next 12 months,” he concludes.
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This post was written by Melanie Leal
