Nvidia stock remains a top pick, with analysts arguing that the chipmaker will take market share this year
“The expectation is that Blackwell demand remains very strong,” said Matt Cioppa, a 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 demand “insane,” and in November he said the chips are shipping in the current quarter amid “very strong” demand.
The shares posted a monthly loss in December, but still gained 171 per cent in 2024, making them by far the biggest single driver of the S&P 500 Index’s overall gain. The stock is already up 11 per cent this year, including a gain of 3.5 per cent on Monday, and is on track for a record close.
Earnings Disappointment
Yet the stock slumped 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 wider margins.
Broadcom Inc. shares have soared nearly 30 per cent in the past few weeks after the chipmaker projected a boom in the market for AI components that it designs for data-centre operators. Marvell Technology Inc. shares have rallied more than 20 per cent since it reported better-than-forecast earnings on demand for its custom AI chips.
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 US$200 billion in market value.
Nvidia remains a top pick at Morgan Stanley, with the analysts arguing that the chipmaker will take market share this year. They’re also looking to Huang’s keynote to be a “positive event.”
“The messaging should be the same — Blackwell demand is exceptional, but supply constrained,” they wrote in a research note last month. “By mid-year we remain comfortable that the focus will remain on Blackwell, which will be the driving force behind revenue” in the second half of the year.
High Stakes
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.
If the stock drops or treads water in the days following Huang’s remarks, that “would be a modest negative in my view into January,” he wrote. Since the tech earnings season won’t begin until later this month, “investors will have little to measure fundamentals and outlooks until then,” he said.
The stakes for Nvidia shares may be elevated, 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 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 positive on Nvidia and other large technology stocks, but is bracing for “a lot more choppiness” ahead.
“At some point there is going to be a ‘show me’ moment in 2025 that is going to have to reaffirm the story,” she said. “Valuation is clearly an issue, and it is important to note how extended the valuation is, even if the AI tailwinds remain intact.”