Economy 09-07-2024 11:18 5 Views

NVIDIA News: Innovations, Updates, and Stock Insights

Nvidia news

NVIDIA News: Innovations, Updates, and Stock Insights

Quick Look:

  • Nvidia CEO Jensen Huang declined a merger with AMD due to his condition of leading the combined entity.
  • This strategic decision allowed Nvidia to become a dominant force in AI technology, with a current market cap of $3.1 trillion.
  • Nvidia’s long-term focus on AI and deep learning positioned it at the forefront of the industry, holding over 80% of the AI chip market.
  • The company’s stock continues to rise, driven by strong demand for its forthcoming Blackwell platform.

According to UBS, Nvidia’s stock continues to rise remarkably due to the robust demand for its next generation of chips, which will enable advanced artificial intelligence capabilities. In a note on Monday, the bank increased its 12-month price objective for Nvidia stock from $120 to $150 per share. Thereby it is now indicating a potential 16% increase from current prices.

Jensen Huang, the CEO of Nvidia, sold around $169 million company shares last month. Remarkably, it was the company’s largest-ever share transaction. The occurrence has raised quite a bit of apprehension among the investors. However, this Nvidia news shouldn’t be a reason for concern. The business continues to dominate the AI sector. Besides, its PEG ratio continues to be attractive for the potential clientele. All the more so, Nvidia is now trading more in line with its fair value than it has in the past.

Nvidia Breaking News: Behind-the-Scenes

Nvidia’s current superiority is a result of its advanced GPU computing technology. Such technology is essential for training AI models and running data centres. Furthermore, Nvidia manages to be ahead of its rivals due to its tendency to brainstorm new ideas swiftly. Take the Grace Hopper super chips or Blackwell architecture, for example. The prime examples of innovative thinking.

As a result, its competitors, Intel (NASDAQ: INTC) and Advanced Micro Devices (NASDAQ: AMD), are fighting for market dominance. To catch up to Nvidia, both businesses are making a great effort to incorporate competitive AI technologies and investigate novel approaches. Currently, both companies seem to focus on AI-capable PCs and accelerators.

Former AMD engineer Hemant Mohapatra shared details on this near-merger on the X platform. He explained that AMD had multiple attempts to acquire Nvidia in the past. However, Huang stuck to his long-term vision, which is similar to an “Apple strategy.” Such an approach aims at long-term commitment between the users and the product provider. Huang refused to sell unless he was made the joint company’s CEO to align with his strategy. It led AMD to back out, causing their future paths to diverge.

Third-Party Confirmation and Historical Context

Current AMD engineer Phil Park confirmed Mohapatra’s statement. However, he clearly expressed disagreement regarding some points. A 2012 Forbes article provides more context and timing for the potential merger where we find out Nvidia almost became part of AMD in 2006. AMD, seeking to gain an edge over Intel by adding a graphics division, approached Nvidia. However, when Huang demanded the CEO position, AMD chose instead to acquire Nvidia’s rival ATI for $5.4 billion in July 2006.

As of now, Nvidia’s market cap of $3.1 trillion vastly exceeds AMD’s $288 billion. Mohapatra wrote that Nvidia stuck to their strategy, and the market eventually caught up with them when AI took off. Most companies would have given up, but Jensen Huang continued to push harder. Nvidia has been producing graphics chips for over 30 years and began focusing on AI and deep learning in 2006. This extensive investment positioned Nvidia at the forefront of the AI industry, with its chips powering OpenAI’s ChatGPT. Nvidia now holds over 80% of the AI chip market, though competition is growing as major tech clients develop their own chips.

Nvidia Stock Forecast Today

Nvidia’s stock price rose on Monday after analysts raised their price targets, citing strong demand for its upcoming Blackwell platform. Shares jumped more than 3% to above $130 before settling. Later, following UBS analysts’ price target increase from $120 to $150 and Wolfe Research’s adjustment from $125 to $150. Blackwell, Nvidia’s next-generation AI-enabled GPU, is set to replace the popular H100 chip later this year, promising significant efficiency improvements. The demand for more powerful chips is due to cloud hyperscalers eager for the new chip’s capabilities. UBS analysts noted that Nvidia could achieve an EPS of approximately $5 by 2025 due to significantly larger order pipeline systems as hyperscaler budgets solidify.

If Nvidia meets this earnings target, it will have a forward price-to-earnings ratio of about 25.6x. Frankly speaking, it is not considered high compared to the S&P 500’s rapid 21x growth. However, sell-side consensus estimates project a lower EPS of $3.62 for 2025, suggesting a 35x multiple. UBS analysts emphasize the strong demand for Nvidia’s Blackwell rack-scale systems, citing supply chain checks that indicate “exceedingly robust” momentum. They attribute part of this demand to enhanced power efficiency amidst AI computing’s power constraints.

Contrary Views Regarding Nvidia’s Future

Despite the overall market sentiment being on the positive side of the spectrum, some believe that Nvidia’s stock has little room for further growth. For example, NewStreet Research analyst Pierre Ferragu has recently downgraded Nvidia stock from a buy to neutral. He cited concerns about its valuation prospects.

Ferragu explains that his opinion is based on the signals from the value chain. He suggests that any significant upside only has a chance to occur in a bull case. Ferragu himself, for instance, isn’t confident that it would happen any time soon. Furthermore, New York University finance professor Aswath Damodaran echoed these concerns, estimating Nvidia could be nearly 50% overvalued.

On the contrary, good news from another major analyst swiftly followed NewStreet Research’s downgrade of Nvidia. UBS analyst Timothy Arcuri stated that the situation is not hopeless at all. In case of the stock’s prolonged weakness, buying a share could be profitable in the long run. Arcuri claims that the stock’s 12-month target would equal $150. Which is a significant raise from his previous prediction – $120.

Strong demand for Nvidia’s upcoming Blackwell platform is driving Arcuri’s optimistic outlook. That way, the company’s sales will reach $204 billion in 2025, 12% more than he predicted.

At the moment, the Wall Street analysts have not yet subdued the overall market disagreement. Fifteen of the 38 analysts polled by LSEG kept their rating neutral. Meanwhile, 21 of them gave Nvidia a buy or strong buy rating.

AI Market Trends: What Is this Fuss All About?

Similarly to UBS, Wolfe Research analysts also reported improved expectations. Recent supply chain checks show a path to over 50% content growth for Nvidia GPUs in 2025. Big tech companies like Microsoft, Alphabet, Meta, and Amazon continue increasing AI infrastructure capital expenditures. Their present-day projections stand at over $1 trillion in AI investments in the next five years. Nvidia’s data centre components, particularly those for Microsoft, are in high demand. Despite some valuation concerns, Nvidia remains strong, second only to Super Micro Computer Inc. among S&P 500 components this year.

As of now, the overall market sentiment remains positive. Nearly 90% of analysts are recommending buying the stock. The research boutique New Stree set a one-year price target of $135 for the stock. Hence, Nvidia news is filled with hopefulness due to their growth trends and valuations. Analysts project trades at over 22 times its estimated revenue for the next 12 months, making it the most expensive stock in the S&P 500 Index by this metric. According to New Street analysts, other AI-exposed stocks like Broadcom Inc., Arista Networks Inc., and Micron Technology Inc. also remain attractively valued.

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