AMD Challenges NVIDIA's AI Dominance: A Shifting Landscape in the Semiconductor Industry

AMD Is Coming For Nvidia's AI Lead (NASDAQ:NVDA)

AMD presents a strong long-term investment with an attractive risk-reward profile as it continues to close the gap with Nvidia in the GPU accelerator market. NVIDIA Corporation (NASDAQ:NVDA) has long been untouchable in the GPU space, and its lead in AI applications especially has often seemed insurmountable. While that likely isn't in danger of changing tomorrow, new AI benchmarks from MLCommons, an organization led by vendors to display their processor performances in an equitable and controlled manner, show that the race is certainly tightening. The group released MLPerf Inference v4.1 benchmark results a couple of weeks ago, showing Advanced Micro Devices, Inc. (AMD) narrowing the gap to Nvidia's performance in AI inference workloads. Could AMD be on the verge of catching up? Let's dive in! While AMD has stormed back from near bankruptcy to outmatch Intel Corporation (INTC) in the data center CPU business, Nvidia has been able to maintain its lead in GPUs despite AMD's push into the GPU accelerator market. There are a few reasons for that, but the main one, in my opinion, has just been the sheer performance advantage of Nvidia's processors. While Intel struggled to scale out its 10 nm (Intel 7) node, Taiwan Semiconductor Manufacturing Company Limited (TSM) stormed past, allowing AMD to design processors on a superior node and eat Intel's lunch. Nvidia has always been basically fabless, so it avoided such pitfalls and has been able to focus on what its engineers are good at designing bleeding-edge processors. And boy, are they good at it. Whether in gaming or the data center, AMD has always been multiple generations behind Nvidia in terms of performance and power consumption. However, as AMD has seen success in the data center server market with its EPYC line of CPUs, it has been able to invest that back into GPU research and development initiatives that have begun to bear fruit. While Nvidia is still far and away the leader in AI training performance, the real golden goose in AI is inference workloads. To quickly recap the difference, training is the process that "teaches" the AI model using a dataset and inference is the process whereby the thought model makes predictions on previously unseen data. Intel CEO Pat Gelsinger gave the example of creating weather models versus consuming them: only a few organizations predict the weather, but hundreds of millions of people check the forecast every day. It's easy to see why inference benchmarks are where people's attention is drawn. MLPerf Inference v4.1 has fresh performance results from a multitude of chipmakers, but let's focus on AMD and Nvidia. The headline takeaway, in my opinion, is that Nvidia's lead is shrinking. For the first time ever, AMD has demonstrated parity with Nvidia's current generation processor in an inference workload: Note: The "Genoa" and "Turin" references are to the generation of AMD's EPYC that the server is running, and these tests were run in 8xGPU configurations. As we can see, AMD's MI300X is essentially level with Nvidia's H100 80 GB GPU in tokens/second in both server and offline inference workloads (server mode more closely matches how a real-world interaction would go). We don't know exactly what these GPUs retail for, but we know AMD is aggressive at pricing its accelerated server offerings and that Nvidia, with net profit margins greater than 50%, is not. This is the same strategy AMD used to undercut Intel in the CPU market, and the strategy is likely to pull some customers away from Nvidia due to the comparable price-to-performance we see above. Further, I should note that the MI300X actually has 192 GB of HBM3 memory, which is significantly more than the 80 GB of the H100 and the 141 GB of the H200. The model used in these evaluations, Llama 2 70B, is fairly lightweight, so these benchmarks are likely under-representing the performance of AMD's processor. Also included in the benchmarks, is Nvidia's take on the matchup: I think it's apparent from both these images that AMD wants to emphasize the parity with the H100 while Nvidia would like to emphasize the lack thereof with the H200. Both have valid points. AMD would like to call attention to the fact that it has come a long way in providing a viable alternative to Nvidia's dominance, and Nvidia is showing the performance gap is still sizable. I'm sure many Nvidia bulls are reading this and wondering why anyone would be concerned when the company is still probably a generation and a half ahead. My response to that would be to look at what AMD did to Intel. Nvidia's management is significantly more competent, but mistakes and missteps happen. For example, while it ended up being a rather short delay, the release of Nvidia's next-generation Blackwell line of GPUs was pushed back because of a small design flaw that was affecting yields. As processors become more complex, design flaws become more likely and what seemed like a massive technological lead could evaporate. Regarding Blackwell, Nvidia submitted benchmarks for just the B200 (the more powerful Blackwell chip), which demonstrated impressive performance (though it's unclear how much was due to hardware improvements or the support for FP4) of 10,755 tokens/second in server mode on the Llama2-70B model. This would represent a nearly 4x improvement over the H100 and MI300X and a 2.5x improvement over the H200. While this all sounds impressive, we'd be remiss not to note that the B200 will surely sell for more than double what an MI300X retails for and its power requirements will be significantly higher. The B100 will be somewhere in the middle. Still, the value proposition will have certainly shifted back in Nvidia's favor, even at a substantially higher price tag. And because the cycle never ends, AMD is aiming for a new fourth quarter release as well: the MI325X. AMD plans to provide more details about the release of this chip at its annual Advancing AI event where it will outline improvements in performance, efficiency, and a massive boost to memory. Specifically, MI325X will sport a hefty 288 GB of HBM3E memory (denser than HBM3), which is also significantly higher than the 192 GB HBM3E of both the B100 and B200, providing AMD a possible value edge in inference workloads for larger AI models. All that said, it's important to remember that hardware is only one side of the equation: Nvidia's true moat lies in its CUDA software layer, which is the gold standard for developers who will actually be creating applications with these models. AMD has built out ROCm into a serviceable alternative, but it still has minimal adoption compared to CUDA and until that changes, Nvidia's current customer base will remain sticky and reluctant to switch ecosystems. On a pure compute basis, AMD appears to be closing the gap with Nvidia in AI inference workloads. The latter still offers many advantages that AMD will have to chip away at, but AMD bulls should be excited about the progress being made. Well, that was a lot of technical talk, what about the stock implications? I still think the overall AI market will continue to sustain the supposedly rich valuations of AMD and NVDA for years to come. The GPU accelerator market will likely remain strong as cloud providers and other big tech companies scale up for an AI revolution that has just begun. Nvidia has the expertise, margins, and market positioning to continue to succeed despite AMD's progress. On the back of this wave of Blackwell processors, which will likely give the company an even bigger boost to its already insane profit margins as the new high-margin processors enter the product mix, continued lead in AI applications, and a software moat that looks impenetrable, Nvidia is a Buy. I recommend bulls keep an eye on these benchmarks going forward to see if the company is maintaining, losing, or maybe growing its lead over AMD and other competitors. However, I think AMD presents a significantly more attractive risk-reward profile than NVDA. The GPU accelerator market will be lucrative for a long time, and AMD still has so little of the market that the potential upside, as the company improves its offerings and continues to close the gap with Nvidia, appears inevitable. Now, this could take years to play out, if not longer, so anyone hoping to buy AMD shares to benefit from the company eating Nvidia's lunch with MI325X or MI350X might want to take a beat. But long-term, AMD is a company that has its hands in all the right pies and whose competitive standing is moving in the right direction. These factors make AMD a Strong Buy. Thanks for reading!

AMD Vs. Nvidia: AI Stock Showdown Heats Up As Market Awaits Next Big Move - NVIDIA (NASDAQ:NVDA), Advanced Micro Devices (NASDAQ:AMD)

Both AMD and Nvidia stock show strong buying pressure, but Nvidia's AI leadership holds a clear edge. The AI supercycle is fueling a heated competition between Advanced Micro Devices Inc AMD and Nvidia Corp NVDA, with both tech giants racing to capture the growing AI market. While AMD stock has gained 39.98% over the past year, Nvidia has surged 161.90%. Year-to-date, the gap is even wider, with AMD up 8.80% and Nvidia soaring 147.33%. After all, Nvidia's first-mover advantage in the AI space has helped it amass over $2.9 trillion in market cap, with AMD left playing catch-up at around $245 billion. AMD's CEO, Lisa Su, recently reaffirmed that AMD's AI roadmap is accelerating, while Nvidia confirmed a strong outlook for its upcoming Blackwell AI GPUs. But how do the two stocks compare on the technical front? AMD's Bullish Momentum Chart created using Benzinga Pro AMD stock has been on a bullish run, with its share price of $150.77 sitting above its five, 20 and 50-day exponential moving averages (EMAs), signaling strong buying pressure. AMD's eight-day simple moving average (SMA) of $143.38 and its 20-day SMA of $147.48 both indicate a bullish signal, while its 50-day SMA of $150.00 reinforces the short-to-medium term bullish sentiment. However, a slight caution flag is raised by AMD's 200-day SMA of $159.25, which sits above the current stock price, creating a long-term bearish signal. While long-term indicators show potential resistance, the short-term outlook remains positive, making AMD stock an attractive pick in the AI space for the near term. Read Also: Cathie Wood's Ark Invest Buys $6.9M Worth Of Shares Of Nvidia Rival AMD, Sells Palantir And Robinhood Stock Nvidia's AI Dominance, Bullish Trend Chart created using Benzinga Pro Nvidia continues to lead the AI race, and its technical indicators show a bullish trend as well. With its share price at $119.11, Nvidia stock is currently trading above its five, 20 and 50-day EMAs, signifying slight buying pressure. Nvidia stock's eight-day SMA of $110.75 and 20-day SMA of $118.74 both flash bullish signals, with the 50-day SMA at $117.55 further supporting this bullish view. Unlike AMD, Nvidia's 200-day SMA stands at $90.74, well below its current price, providing a strong bullish signal for the long term. The stock is positioned for continued strength, boosted by its upcoming Blackwell chips and AI leadership. Both AMD and NVIDIA are showing bullish momentum in the short term, with strong technical support. While AMD is making aggressive strides to catch up with Nvidia's AI dominance, Nvidia's leadership in the market remains secure, backed by robust technical indicators and an advanced product roadmap. Investors may find opportunities in both stocks, but Nvidia currently holds the edge. Read Also: Nvidia Analyst Praises Huang's Insight That Hyperscale Customers Earn '$5 In Rental Revenue For Every $1 Spent' Photo: Shutterstock Market News and Data brought to you by Benzinga APIs

Nvidia Isn't Slowing Down Anytime Soon (NASDAQ:NVDA)

Nvidias's Ethernet for AI revenue doubled, with Spectrum-X boosting performance by 1.6x, signaling multi-billion-dollar potential. Investment Thesis Despite NVIDIA Corporation's (NASDAQ:NVDA) recent 15% pullback since our last coverage, its long-term fundamentals remain strong. The giant continues to lead in AI and data center technologies, driven by growing demand for cutting-edge GPU computing, networking platforms, and next-gen architectures like Hopper and Blackwell. Nvidia's record-breaking revenue and expanding market presence across multiple industries position it for sustained growth as the AI revolution accelerates globally, reaffirming our strong buy rating. On the technical side, Nvidia's momentum is currently neutral, but bullish divergence hints at potential upward movement. Combined with robust fundamentals, this presents a compelling opportunity for investors to capitalize on Nvidia's future growth despite short-term market fluctuations. Bullish Divergence: Is Nvidia Poised for a September Rebound? NVDA is currently trading around $108. The average price target for 2024 is set at $143, which corresponds to a 3-point Fibonacci level (0.786). This level indicates potential growth in alignment with common retracement patterns. The optimistic target of $162 aligns with the 1 Fibonacci level, suggesting a possible bullish run. Meanwhile, the pessimistic target of $116 matches the 0.382 level, which reflects a conservative estimate with limited downside. Moreover, the RSI is at 49.65, hovering near the neutral zone of 50, indicating a lack of clear momentum. However, the presence of bullish divergence signals potential upward price movement. This can happen even though the RSI trend is reverting downwards. This downward shift in the RSI suggests short-term weakness, but the long setup near 30 hints at a possible bottom formation that offers an entry point for buyers if the RSI touches this level. Further, the Volume Price Trend (VPT) line is currently at 16.05 billion, slightly above its moving average of 15.86 billion, which signals modest volume support. However, the downward trend in the VPT line indicates a reduction in buying pressure. A potential reversal could occur as the VPT line approaches the moving average, which marks a bottom touchdown scenario. September has a 54% chance of positive returns, signaling a neutral outlook with modest potential gains. October improves slightly to a 56% probability, suggesting a more favorable environment as the month progresses. November has a 76% likelihood of positive returns, making it one of the strongest months for NVDA historically. This upward trend from September to November indicates increasing seasonal strength, with November offering the best odds for gains. Q2 FY2025: Dominating the AI and Data Center Boom with Record-Breaking Revenue Growth Nvidia's earnings highlight explosive growth and solidify its strategic leadership in the AI and data center sectors. Record revenue came in at $30 billion, 15% higher than last quarter and 122% higher year over year. This is driven mainly by the Data Center segment, with revenue of $26.3 billion, up 154% compared to last year. As enterprises and cloud providers accelerate their adoption of AI and generative AI technologies, Nvidia's GPUs and AI software platforms have become essential tools. Demand for that forthcoming Blackwell architecture, says CEO Jensen Huang, is "incredible," a prophecy of future solid demand and an exceptionally favorable market position for its AI hardware. Despite such fantastic revenue growth, its GAAP gross margins fell to 75.1% from 78.4% in the previous quarter. This likely reflects increased operational expenses, up 12% quarter-over-quarter to $3.93 billion because the company invests heavily in research and development to keep its competitive edge. Operating income demonstrated strong growth, effectively managing rising costs relative to top-line expansion. It surged by an impressive 174% year-over-year, reaching $18.6 billion. The EPS also reflected strong profitability, with the GAAP EPS reaching $0.67, representing 168% year-over-year growth. Such massive growth in EPS further confirms the company's substantial net income, up 168%, reaching $16.6 billion. Such a figure suggests that NVIDIA effectively converts its revenue growth into shareholder value. Additionally, the company's aggressive share repurchase program further bolsters confidence in continued growth. The return of $15.4 billion to shareholders during the first half of FY2025, with another $50 billion authorized for share repurchases without expiration, shows a solid commitment to shareholder value enhancement. It further indicates that management is confident that future cash flows will be vital. The outlook for Q3 FY2025 remains optimistic, with NVIDIA projecting revenue of approximately $32.5 billion, with a margin of plus or minus 2%. This guidance supposes that business and demand will remain strong for the company's products, AI, and data center solutions. Forecasted gross margins in the mid-70% range anticipate the company continuing to gain profitability without any cost increases. Hence, with strategic investments in next-generation AI architectures, partnerships, and more product offerings, Nvidia is poised and ready to take full advantage of the acceleration in AI technology usage across critical industries. Data Center Is Still A Triple-Digit Game Changer In Q2 fiscal 2025, Nvidia attained solid top-line performance, with revenue reaching $30 billion, marking a 15% sequential growth and a 122% year-on-year (YoY) increase that exceeded Nvidia's projection of $28 billion for the quarter. The data center segment revenue at $26.3 billion was a record for the company, representing a 16% sequential rise and a 154% YoY growth. Additionally, Nvidia continues to capitalize on strong demand for GPU computing and networking platforms, especially the Nvidia Hopper platform. Hopper's accelerating demand still leads the company's progress in data centers. Advanced demand for Blackwell is considerably above the supply in this segment, as production ramps will initiate in Q4. Specifically, compute revenue surged 2.5 times YoY, while networking revenue more than doubled during the same period. Cloud service providers (CSPs) accounted for about 45% of this revenue, while consumer, internet, and enterprise companies contributed over 50%, forming a diversified client base. This diversification helps Nvidia adapt to shifting market demands across industries. Nvidia's platform architecture, particularly Hopper integration with AI-centric workloads like model training, may continue to fuel the demand. Looking forward, next-generation AI models now require 10 to 20X more computing power. This puts Nvidia in a lead position to capitalize on this growing demand. Over the last four quarters, inference workloads contributed 40% to the company's data center revenue. Nvidia's tech advancement and related accelerating AI demand create a growth cycle. Thousands of companies and startups rely on Nvidia for generative AI applications across healthcare, advertising, and robotics. The Hopper and the upcoming Blackwell architectures will help maintain Nvidia's top-line lead in scalable AI infrastructure. For instance, Nvidia ramped up its H200 platform in Q2 2025, which delivers 40% more memory bandwidth than its predecessor, H100. This back-to-back architectural improvement promotes the companies' transition from Hopper to Blackwell, slated for fiscal 2026. Nvidia's upcoming Blackwell platform may integrate GPU, CPU, DPU, NVLink, and networking chips to power next-gen AI systems. This technology and Hopper boost performance, enabling up to 30 times faster inference for large language models (LLMs) in real-time. Similarly, Nvidia's Ethernet for AI revenue doubled sequentially due to strong demand for AI infrastructure. The Spectrum-X platform provided a 1.6 times performance boost over traditional Ethernet, complementing Nvidia's dominance in the GPU sector. The Ethernet segment may become a multi-billion-dollar product line in the upcoming quarters. Finally, the sovereign AI market is another promising area of top-line growth for Nvidia. Countries like Japan are investing in Nvidia's AI infrastructure for large-scale projects like the AI Bridging Cloud Infrastructure ("ABCI") 3.0 project. These sovereign AI opportunities are projected to generate double-digit billions in revenue in fiscal 2025, marking Nvidia's expansion into new, large-scale markets. The Stock's Overvaluation Is Justified Nvidia has strong growth potential to justify its high valuation. For instance, its forward-looking PEG ratio of 1.02 is 42.75% lower than the sector median, indicating better growth prospects. The ratio is also 50.81% lower than its five-year average, indicating potential undervaluation. Nvidia's market position in AI, too, justifies such expectations, while generative AI and autonomous vehicles are some of the trends that will keep up this growth. Specifically, Nvidia may outperform the sector in the coming years as the generative AI market offers a major opportunity. For instance, as per Goldman Sachs, US tech giants will spend $215 billion on AI in 2024, up from $125 billion in 2022. Although AI spending may decline, Nvidia's Hopper and Blackwell platforms remain critical for AI infrastructure, as the tech enables companies to leverage AI across industries. The successful development of its Blackwell platform will help Nvidia capture the next wave of AI-driven growth. Overall, the market is not expecting continuity of midterm triple-digit growth in the company's top-line. In contrast, the company itself is not sending any signal of revenue slowdown, and the street revisions are going in a positive direction. To support the argument further, TSMC's robust Q3 2024 revenue estimates (+37% YoY) indicate healthy demand from consumer electronics, automotive, and high-performance computing industries. Lastly, a critical indicator of Taiwan Semiconductor Manufacturing Company Limited's (TSM) August revenue (+33% YoY) also signals a recovery in sectors like data centers, a significant Nvidia market. Downsides: High Dependence On Data Center And Supply Chain Bottlenecks Nvidia's Q2 2025 earnings marked this rapid expansion with specific challenges. Despite the company's dominant market position and expanding product offerings, data center revenue remains the strongest and largest fraction of Nvidia's top-line. The growth in this segment points to Nvidia's heavy reliance on its data center business and AI-driven products like Hopper and the future Blackwell architecture. This reliance poses a concentration risk, creating an overdependence on AI spending budgets in the sector. In short, Nvidia's other segments are failing to cope with data center revenue growth, making Nvidia vulnerable to shifts in cloud spending or changes in corporate demand for AI-related hardware. As demand for AI-related hardware grows, production constraints may emerge, especially with the upcoming Blackwell platform. Nvidia acknowledged supply shortages for Blackwell, a new GPU platform. Although demand for the platform is robust, supply is currently constrained, and the ramp-up for Blackwell may also be subject to shipment restrictions, the same as on Hopper platform shipments. These supply chain bottlenecks could slow the company's capability to capitalize on rising market demand (as China is excluded). Finally, street sentiment is also an issue with Nvidia's stock. The company's massive base of irrational followers (investors) may cause massive downside moves if it fails to feed their expectations about back-to-back moonshots. Takeaway Nvidia Corporation shows potential for a September rebound, with a price target of $143 aligning with Fibonacci retracement. Bullish divergence and a neutral RSI hint at upward movement despite short-term weakness. Seasonal trends indicate increasing strength, with November being historically strong. Therefore, Nvidia's dominance in AI and data centers drives growth, but supply chain constraints and reliance on AI demand pose risks. Nevertheless, Nvidia maintains strong leadership in AI and data centers, driving long-term growth despite short-term stock fluctuations. The company's outlook remains highly positive, with continued investments in cutting-edge technologies like Blackwell and increasing AI demand. Strategic share buybacks further reinforce confidence in Nvidia's sustained growth trajectory. Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks. Yiannis Zourmpanos founded Yiazou IQ, an AI-powered stock research platform generating comprehensive all-in-one stock reports. He previously worked for Deloitte and KPMG in external and internal auditing and consulting. Yiannis is a Chartered Certified Accountant and a Fellow Member of ACCA Global, and he holds BSc and MSc degrees from leading U.K. business schools. Analyst's Disclosure: I/we have a beneficial long position in the shares of NVDA, TSM either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Understanding The Opportunities And Challenges Of Investing In Nvidia (NASDAQ:NVDA)

If the company disappoints in the slightest, positive sentiment surrounding it could quickly evaporate. Therefore, most prudent investors would be better off not buying NVIDIA today. That assessment turned out to be accurate over the last three months. Investor sentiment has turned sour towards AI infrastructure stocks, fearing the sector may be in a bubble. Although the company's second-quarter fiscal year (FY) 2025 report exceeded analysts' revenue and earnings guidance, Wall Street was disappointed to see revenue growth slow. Additionally, investors don't like hearing the news that the company may delay the introduction of its new Blackwell AI chip, causing the company to issue lower-than-expected third-quarter guidance. Since my last article, the stock is down 17.11% compared to the S&P 500's (SPX) loss of 1.73%. This article will discuss how the company plans to sustain its long-term revenue growth and profitability and its latest earnings report. It will also examine several risks, its valuation, and why I maintain my hold recommendation. Nvidia is becoming more than just a hardware company. Management likely realizes that selling hardware uses a one-time sales model, involving a constant effort to sell the newest AI chip and associated hardware to generate revenue. Today, that model works because the company dominates the AI chip and networking industry. Demand for AI chips also exceeded supply at the beginning of this AI era. However, that may no longer be the case five years or a decade from now. Advanced Micro Devices (AMD) is beginning to provide a serious alternative to Nvidia's AI accelerators on both the training and inferencing sides. The AI market is also starting to shift from training to inferencing. Nvidia has far more competition on the inferencing side of AI, including Broadcom (AVGO), Qualcomm (QCOM), Habana Labs under Intel (INTC), a whole slew of AI hardware start-ups, and its cloud customers developing their own AI inference chips. At some point, competition in the AI hardware market could commoditize the industry and reduce Nvidia's margins if it remained only a hardware company. Nvidia guards against that possibility by attaching various software and services to its hardware, similar to how Apple (AAPL) has attached many services to the iPhone. One Seeking Alpha analyst recently briefly discussed the importance of one of the company's software initiatives, Nvidia Inference Microservices (NIM). Chief Financial Officer (CFO) Colette Kress discussed NIM on Nvidia's second quarter FY 2025 earnings call (emphasis added): Nvidia NIM accelerate and simplify model deployment. Companies across healthcare, energy, financial services, retail, transportation, and telecommunications are adopting NIMs, including Aramco, Lowe's, and Uber. AT&T realized 70% cost savings and 8 times latency reduction after moving into NIMs for generative AI, call transcription, and classification. The first sentence in the above quote describes what NIM does for customers. If you read the technical definition of what NIM accomplishes for developers on the company's website and are not in the tech industry, confusion about what NIM does and why companies may want it may abound. Let's make things more understandable. Enterprises may not have the in-house expertise to train and deploy AI models effectively. So, NIM offers customers pre-trained AI models that customers can easily install in their existing computing architecture. The software improves the performance of AI applications and reduces the time and cost of an organization attempting to train and deploy AI models. CFO Kress also discussed another service the company offers customers: Nvidia AI foundry service. She said the following on the second quarter earnings call: During the quarter, we announced a new NVIDIA AI foundry service to supercharge generative AI for the world's enterprises with Meta's Llama 3.1, collection of models. This marks a watershed moment for enterprise AI. Companies for the first time can leverage the capabilities of an open-source frontier-level model to develop customized AI applications to encode their institutional knowledge into an AI flywheel to automate and accelerate their business. Accenture (ACN) is the first to adopt the new service to build custom Llama 3.1 models for both its own use and to assist clients seeking to deploy generative AI applications. At first glance, it may seem to the non-techie that AI Foundry and NIM do the same thing, but that's a false assumption. The AI Foundry service does a lot more than NIM. It helps enterprises develop custom AI models from the rooter to the tooter. In other words, AI Foundry assists the company's developers create AI models for specific company needs, train those models, optimize the AI model to run faster and more efficiently, and deploy those models for use. NIM only helps customers deploy pre-existing models, which may be suitable for general needs but not specific needs unique to the customer. Nvidia hosts AI Foundry on DGX Cloud, available on Amazon's (AMZN) AWS (Amazon Web Services), Alphabet's (GOOGL, GOOG) GCP (Google Cloud Platform), Microsoft's (MSFT) Azure, and Oracle's (ORCL) OCI (Oracle Cloud Infrastructure). On July 8, 2024, a Seeking Alpha analyst wrote a detailed explanation about AI Foundry and the DGX cloud in an article titled "Nvidia: Upside Potential Is Greater Than You May Think." That whole explanation boils down to NVIDIA is establishing a SaaS (Software-as-a-Service) opportunity that, in 2023, the company estimated at $150 billion. A SaaS opportunity adds a recurring revenue model to its overall business, diversifying the company from only selling hardware in a one-time sales model. Investors often value a recurring revenue model more than a one-time sales model. Last, Nvidia has aligned itself with several top computer manufacturers to build AI factories and data centers. The company issued a press release on June 2, 2024, that stated, "During his COMPUTEX keynote, NVIDIA founder and CEO [Chief Executive Officer] Jensen Huang announced that ASRock Rack, ASUS, GIGABYTE, Ingrasys, Inventec, Pegatron, QCT, Supermicro, Wistron and Wiwynn will deliver cloud, on-premises, embedded and edge AI systems using NVIDIA GPUs and networking." "Our building-block architecture and rack-scale, liquid-cooling solutions, combined with our in-house engineering and global production capacity of 5,000 racks per month, enable us to quickly deliver a wide range of game-changing NVIDIA AI platform-based products to AI factories worldwide." I recently wrote about Supermicro, announcing that it was getting into the business of designing whole data centers with its Supermicro 4.0 DCBBS, Datacenter Building Block Solutions. If it is successful in that venture, Supermicro may become one of Nvidia's most valued partners in designing and constructing an AI Factory data center from the ground up more rapidly than any other company. Although Nvidia's CEO didn't mention Dell (DELL) at COMPUTEX, the Dell Nvidia AI factory concept could be another revenue growth driver. Dell describes its AI factory partnership with Nvidia on its website: "The Dell AI Factory with NVIDIA is the industry's first end-to-end AI enterprise solution integrating Dell's compute, storage, client device, software, and services capabilities with NVIDIA's advanced AI infrastructure and software suite, all underpinned by a high-speed networking fabric." Nvidia's total revenue increased by 122.4% over the previous year's comparable quarter to $30.04 billion. Although triple-digit revenue growth is impressive in today's economy, the chart below shows revenue growth decelerating -- a trend investors hate to see. Nvidia's GAAP (Generally Accepted Accounting Principles) gross margin dropped from 78.9% in the first quarter of FY 2025 to 75.15% in the second quarter, the first sequential decline since the introduction of ChatGPT in late November 2022. The CFO also explained why gross margins were down on the earnings call (emphasis added): "[Gross margins were] down sequentially due to a higher mix of new products within the data center and inventory provisions for low-yielding Blackwell material." Because newer data center hardware products can sometimes be pricier to produce until the company can optimize the manufacturing process, a larger mix of new products can sometimes lower the overall gross margin. Additionally, when semiconductor manufacturers introduce new chips into production, especially when using a new process, the number of functional chips per wafer is lower than expected until the company perfects the new chip manufacturing method. When the CFO mentions Blackwell as low-yielding, the company's gross margins are lower because the cost to manufacture each wafer remains the same. However, the company generates less revenue with fewer functional chips per wafer. Nvidia has apparently resolved this issue. The company's second-quarter CFO Commentary states (emphasis added), "We executed a change to the Blackwell GPU mask to improve production yield." Investors must continue to monitor gross margins because there is another potential reason why gross margins could go lower. A declining gross margin could indicate the emergence of genuine competition in the market for AI accelerators. Advanced Micro Devices has started gaining traction with its new AI accelerator, the AMD MI300, the equivalent of an Nvidia H100 chip. Additionally, its cloud customers Amazon's (AMZN) AWS, Alphabet's (GOOGL, GOOG) GCP, and Microsoft's (MSFT) Azure have developed their own AI chips. Furthermore, many AI startups with inference chips have emerged over the last ten years that may provide competition. Suppose Nvidia management maintains gross margins in the high 70s through higher pricing. In that case, there's a genuine threat of losing market share as cloud customers rely more on their chips, and enterprises look for equivalent AI chips at lower prices from providers like AMD or Intel (INTC). By slightly lowering its gross margins, Nvidia can increase its competitiveness and have a better chance of maintaining or improving its dominant market share. However, if gross margins ever steadily decline in the future, it may indicate a price war and the commoditization of the AI chip market. The company's operating expenses took a massive jump over last year. The company's CFO Commentary stated: GAAP [Generally Accepted Accounting Principles] operating expenses were up 48% from a year ago and up 12% sequentially, and non-GAAP operating expenses were up 52% from a year ago and up 12% sequentially. These increases were largely driven by compensation and benefits, reflecting growth in employees and compensation. The AI infrastructure market is very competitive, and Nvidia likely needs to raise compensation to attract and retain quality talent. However, this increase in operating expenses and the lower gross margin likely helped reduce operating margins sequentially to 62.06%. Still, its operating margins are outstanding compared to competitors. Nvidia's GAAP diluted earnings-per-share increased by 168% year over year and 12% sequentially to $0.67, beating analysts' consensus estimates by $0.06. Nvidia produced an eye-popping TTM cash flow from operations (CFO) to sales of 50.53% in the second quarter, meaning the company produced fifty cents for every $1 of sales. No other hardware company comes close. If it can maintain a CFO to sales this high and a high revenue growth rate, it will portend great things for FCF. The following chart shows the company's sources and uses of cash in the second quarter. Nvidia ended the second quarter of FY 2025 with $34.8 billion of cash and short-term investments, an increase of 18.8 billion over the previous year. It had $8.4 billion in long-term debt. The company has a debt-to-EBITDA ratio of 0.16. A number under one means Nvidia has more than enough cash flow to cover its outstanding debt. The company is in excellent financial condition. The following chart shows that since the AI era took off after the introduction of ChatGPT in late 2022, the company's FCF has skyrocketed. The company's FCF growth over the last year and a half is a prime reason investors value Nvidia higher than other AI hardware stocks. The company's second quarter FY 2025 TTM FCF is 46.786 billion. Over a TTM period, the company spent $21.36 billion on stock buybacks and $540 million in total dividends. The following chart shows that the company started share buybacks in 2022 and raised them substantially over the last year. It also raised, returning capital to shareholders via dividends in 2024 after several years at the $400 million level. The following image shows the company's guidance for the third quarter of FY 2025. If the company hits third-quarter revenue guidance of $32.5 billion, revenue growth will be 79%, another sequential revenue decline. The market will often punish growth stocks with decelerating revenue growth. Third-quarter non-GAAP gross margin guidance of 75% was below the analyst consensus forecast of 75.5%. After seeing this disappointing guidance, the stock dropped 6.4% the day after earnings. The company's decelerating revenue and disappointing gross margin guidance exacerbated worries over whether the AI infrastructure market is in a bubble. Wall Street worries that all the investments that cloud companies and enterprises are making in AI infrastructure are not providing enough return on investment. Cloud companies and enterprises could potentially slow investments in AI, negatively impacting Nvidia. Nvidia's move into software and services may make the company's revenue growth more sustainable over a more extended period. However, it makes government regulators nervous. They would rather not see one company dominate an industry as important as some believe AI can become. Today, the company is on the way to becoming the toll collector on every road to AI globally. So, there is a genuine risk that regulators globally will do things to impede Nvidia's business, including breaking the company up. Nvidia's TTM price-to-earnings (P/E) ratio is 49.46, well below its five-year median P/E but around even with its ten-year median. Some may consider the stock undervalued because it is well below its five-year median. Yet others may think it is fairly valued based on its being even with its ten-year median. One flaw in assessing a stock by its TTM P/E is that it's a backward-looking valuation method, and the market often values stocks based on what it believes will happen in the future. Nvidia has a forward Price/Earnings-to-Growth (PEG) ratio of 0.30 (FY 2025 forward P/E of 36.19 divided by FY 2025 analyst EPS estimated growth rate of 119.25%) and a one-year forward PEG ratio of 0.64 (FY 2026 forward P/E of 25.76 divided by FY 2026 analyst EPS estimated growth rate of 40.50%). A PEG ratio below one may indicate that the market undervalues analysts' estimated earnings growth. Suppose it trades at an FY 2025 PEG ratio of 1.0; the stock price would be $338.67, a 218% increase above its September 9 closing price of $106.47. If it trades at a one-year forward PEG ratio of 1.0, the stock price would be $161.60, a 51.77% rise above its September 9 closing price. The chart below shows that Nvidia's FCF yield is 1.76%. Based on how the stock has traded over the last five years, I believe the ideal time for more cautious value investors to buy it is when the FCF yield exceeds 2.0%. Value investors should consider selling when the FCF yield goes below 0.70%. In my opinion, the stock sells at a fair valuation based on a 1.76% yield, which means there is still a significant potential upside for aggressive growth investors. However, there is a genuine risk that the stock could continue to drop for more risk-averse investors. Using a reverse discount cash flow (DCF) analysis, let's analyze Nvidia. This DCF uses a terminal growth rate of 4% because the company should continue steadily growing its cash flow well above the market average after the ten-year analysis period. I use a discount rate of 10%, which is the opportunity cost of investing in Nvidia, to reflect a moderate risk level. This reverse DCF uses a levered FCF for the following analysis. If Nvidia can maintain a 49% FCF margin for the next ten years, the company must grow revenue by 19.5% annually to justify the September 9 closing price. Nvidia grew its revenue by around 31% over the last ten years. Revenue growth should slow from that pace over the next ten years. However, considering the potential size of Nvidia's opportunity, which the company estimated at $1 trillion in 2023, and its current dominance in AI and general-purpose computing, the company may be able to grow revenue 20% annually over the next ten years. Still, that's a very aggressive assumption. Nvidia produced $96.31 of TTM revenue in the second quarter of FY 2025, meaning the company has already captured 9.63% of a $1 trillion opportunity. Suppose the company grows revenue at 20% annually for the next ten years; it will produce $594 billion in TTM revenue, or 59% of its current total addressable market. This calculation doesn't factor in its estimated total addressable market (TAM) growing over the next ten years. However, Precedence Research forecasts that the global AI market will grow at a Compound Annual Growth Rate (CAGR) of 19.1% from 2024 to 2034 to reach $3.68 trillion. Suppose Nvidia's revenue growth matches the estimated growth rate of the global AI market over the next ten years; it will produce $546.69 billion in annual revenue in 2034, or 14.9% of the global AI TAM in 2034, something that may be feasible. The big issue is that Nvidia will likely encounter more competition in AI chips over the next ten years than today; it is unlikely to maintain an FCF margin of nearly 50%. Assuming it can achieve an average FCF margin of 35% and grow revenue at 19% annually over the next ten years, its estimated intrinsic value is $74.02, or 30% below the September 9 closing stock price. Assuming it can grow at 20% annually over the next ten years at an average FCF margin of 35%, its estimated intrinsic value is $79.73. The above analysis contains many assumptions; no one should accept them as the Gospel. Be aware that no valuation tool holds all the answers and that a stock can sometimes remain undervalued or overvalued for long periods due to market conditions, investor sentiment, or company-specific situations. In my last article on Nvidia, I said: Suppose you are a momentum investor only looking for short-term profits and willing to accept the risks. In that case, you may still be able to buy the stock and achieve potential gains over the next year due to the optimistic sentiment surrounding the company. That statement remains true. If an investor has an aggressive growth mindset or is a momentum investor looking for short-term profits and is willing to accept some risk, this pullback may be an ideal time to buy the stock for a one- to three-year time horizon. Additionally, investors who already own shares should continue to hold, as there is still potential upside in the near term from the adoption of Nvidia's new Blackwell chip. However, after FY 26, there is a rising risk that competition or regulators could negatively impact revenue growth, profitability, FCF, or investor sentiment. Longer-term buy-and-hold investors may be better off waiting for a more significant sell-off to bring the FCF margin over 2% or investing in other companies with a better risk versus reward ratio.

Nvidia: Big Opportunity To Buy Into The King Of AI (NASDAQ:NVDA)

Looking for a helping hand in the market? Members of Ultimate Growth Investing get exclusive ideas and guidance to navigate any climate. Learn More " Nvidia Corporation (NASDAQ:NVDA) investors have endured an extended consolidation zone as the market reassesses the ability of the "Godfather of AI" to keep generating stellar performances. Nvidia's guidance at its recent earnings release didn't inspire enough confidence to keep repeating those breathtaking results. Coupled with the unanticipated delay in the shipment of its Blackwell architecture, the market will likely ask for further proof points before buying into its potential upside through FY2025. In Nvidia's FQ2 earnings commentary, management underpinned its confidence by asserting that Nvidia's customers have started to sample its Blackwell chips. However, the inherent complexity of its design suggests execution risks leading to solid yields in its production process with its foundry partner TSMC (TSM) will likely be higher. While Nvidia telegraphed its confidence that its current Hopper generation can continue to underpin robust demand dynamics as Nvidia transitions to Blackwell, investors are justifiably cautious. The company reported data center revenue of $26.3B in FQ2. Although it indicates a more than 150% YoY increase spurred by aggressive AI infrastructure investments, it also represented a slowdown from FQ1's performance (427% YoY surge). As a result, while the optimism by the leading hyperscalers and cloud service providers should underpin a continued Hopper growth cadence, the law of large numbers is catching up rapidly. In other words, Nvidia investors might need Blackwell to ramp up quickly in the transition. Notwithstanding the near-term caution, management emphasized that its "customers continue to accelerate their Hopper architecture purchases while gearing up to adopt Blackwell." Therefore, Nvidia investors should be assured of the company's optimism that "Hopper shipments are expected to increase in the second half of fiscal 2025." Notwithstanding the underlying strength of Nvidia's Hopper architecture, Nvidia must demonstrate that it can effectively improve its Blackwell production yields. Accordingly, the company highlighted that it anticipates Blackwell will start ramping from FQ4, indicating we should expect a more robust growth infection from FY2026. I concur with management's optimism that the "demand for Blackwell platforms is well above supply." It aligns with recent commentary, indicating that Nvidia's full-stack infrastructure provides a solid competitive edge not just for AI training but also for inference. Nvidia AI clusters are now considered "table stakes" for the leading AI companies and big tech. Therefore, Nvidia's Blackwell confidence seems apt, suggesting that a solid ramp cadence isn't overstated, underpinning the potentially aggressive AI infrastructure investments. In addition, I assess that the anticipated uptick in Sovereign AI demand is likely still nascent. Management upgraded its revenue outlook on Sovereign AI to reach "low-double-digit billions this year." The AI arms race is expected to increase among nations as they seek to capitalize on their exclusive data domain to gain an edge. In addition, the market might not have considered the potentially increased adoption among enterprise users as AI factories become mainstream over time. Management updated that it's "working with most of the Fortune 100 companies on AI initiatives across industries and geographies." Therefore, it should bolster the market's confidence in AI monetization, even though there could be questions about how effective the AI go-to-market strategies have been. Nvidia's revenue growth profile is expected to normalize after the initial spike over the past year. However, its adjusted EBITDA profitability isn't likely to be markedly impacted, notwithstanding the recent low yield issues affecting its gross margins. Hence, analysts expect Nvidia to maintain its pricing power even as it navigates potentially more intense competition from Advanced Micro Devices (AMD). AMD's AI revenue will not likely present a significant threat to CEO Jensen Huang and his team in the near term. Despite that, AMD is progressing to narrow Nvidia's full stack advantage, although it's still too early to assess the impact on NVDA's market leadership. NVDA's fundamentally strong thesis is undoubtedly robust, boasting an "A"+ profitability grade. Therefore, it provides a solid foundation for the market to remain confident despite concerns about the production yields impacting its Blackwell chips. In addition, its "A+" growth grade suggests investors should apply the appropriate growth-adjusted valuation metrics when assessing a further valuation re-rating opportunity. Accordingly, NVDA's forward adjusted PEG ratio of 1.02 is more than 40% below its sector median. Therefore, I assess that the market has likely baked in pessimism over the sustainability of its bullish AI thesis. The caution is justified, given the anticipated normalization of its revenue growth momentum. However, that also suggests that a much more robust forward outlook attributed to underlying strength in Sovereign AI and enterprise demand could move the needle on its valuation profile. Consequently, I assess the ongoing consolidation zone as appropriate for long-term investors to consider adding exposure while awaiting more constructive Blackwell commentary from management. Rating: Maintain Buy. Important note: Investors are reminded to do their due diligence and not rely on the information provided as financial advice. Consider this article as supplementing your required research. Please always apply independent thinking. Note that the rating is not intended to time a specific entry/exit at the point of writing, unless otherwise specified. Have constructive commentary to improve our thesis? Spotted a critical gap in our view? Saw something important that we didn't? Agree or disagree? Comment below with the aim of helping everyone in the community to learn better!

Nvidia: The Price Is Too High (NASDAQ:NVDA)

We also believe that Nvidia is overvalued, its upside is limited, and its stock is a SELL for us. Nvidia Disappoints The Market Two weeks ago, Nvidia (NASDAQ:NVDA) released its Q2'25 earnings report, which showed that the revenues during the quarter were $30.04 billion, up 122.4% Y/Y and above the consensus by $1.29 billion. Despite such results, the company's shares initially declined after the results were revealed. In part, the decline was caused by the expectations that Nvidia's growth rate is about to normalize in the upcoming quarters, which means that the triple-digit growth rate is likely to be a thing of the past next year and beyond. If we look closely at the performance of Nvidia's stock, we'll see that it started to gain momentum in May 2023. That is when the Q1'24 report was released, which showed that while the company's revenues declined Y/Y, major growth was expected in the following quarter thanks to the increased demand for its first generative AI GPUs from the H100 series that started to gain traction back then. As the generative AI revolution began to gather steam, the sales for the company's AI GPUs were accelerating, which made Nvidia trade at excessive multiples that are mostly far beyond the sector's median multiples. Ever since that report came in, the market's perception was that the company needed to significantly beat the consensus estimates and meaningfully increase its guidance all the time for the shares to continue to trade at those high multiples. This has been the case in recent quarters so far. In Q3'24, Q4'24, and Q1'25, Nvidia beat the revenue consensus by a wide margin and announced a major guidance increase that was above the street expectations by a significant margin as well. Thanks to this, Nvidia's shares rallied, and the company was able to become one of the most valuable businesses in the world in less than two years. However, after the recent Q2'25 report came in, there's a sign that the pace of growth appears to be slowing down, and it's one of the main reasons why the stock has been declining recently. CNN reported that investors were likely disappointed that Nvidia didn't beat the estimates by a wider margin. Another Seeking Alpha contributor Jonathan Weber also noted that while the revenue estimates were beaten by around 4%, it's not as great when compared to a year ago when revenue estimates were beaten by around 20%. If we look at Nvidia's earnings history, we'll see that the revenue beat in absolute numbers has been shrinking during each consecutive quarter starting from Q2'24. Professor Aswath Damodaran noted that there are clear signs of more slowing to come, as scaling will continue to push revenue growth down. In addition to that, the guidance also was relatively weak and contributed to the decline in share price as well. In Q3, Nvidia expects to generate $32.5 billion in revenues, which is less than a billion dollars from the consensus of $31.71 billion. This was one of the biggest disappointments of the recent earnings report, as the market expected a better guidance. Professor Aswath Damodaran also explained what to make from this guidance and what's to come next, and we fully share his point of view: As a company that has played the expectations game well, it should come as no surprise that Nvidia provided guidance for future quarters in its second quarter report, and here too, there were reminders that comparisons would get more challenging in future quarters, as they predicted that revenue growth rates would come back to earth, and that margins would, at best, level off or perhaps even decline. Additional Issues To Consider While the guidance has been rather disappointing, there's also a possibility that it would be more challenging for Nvidia to meet it, and especially exceed it, as it faces some additional challenges right now. Last month, news came in that Nvidia's upcoming Blackwell GPUs will be delayed, which resulted in a short-term selloff of the company's shares. Nvidia in the recent conference call hinted that the potential delay was due to the technical change to improve the production yields of Blackwell and the production ramp-up is expected only in Q4. As such, there's a possibility that the overall performance in Q3 could also disappoint investors when the next earnings report comes out in November. There's also a risk that the guidance in the next earnings report could also disappoint investors, since the company faces some external risks that are outside of its control. In the Q1 earnings call, the management admitted that their data center revenue in China is down significantly due to the American chip export restrictions that were implemented last year. In the recent Q2 earnings call, they repeated that their current sales in China are below the previous levels. Since the China-USA relations are not expected to significantly improve anytime soon and Beijing has recently retaliated by imposing its export restrictions as well, the macro risks will remain and will likely continue to undermine Nvidia's efforts to grow revenues across the globe. As a result of all of that, we believe that Nvidia is not a good investment right now and its shares have a decent chance of continuing to depreciate or trade sideways in the upcoming months. The Intrinsic Value of Nvidia Right now, we believe that Nvidia's stock is also overvalued, especially since it trades at a forward P/E of 38x, while the sector's median P/E is only 23x. Seeking Alpha's Quant system also gives Nvidia a rating of D- for valuation. To figure out Nvidia's intrinsic value and how big is its downside, we created our valuation model. To create a model, we added some initial data that can be seen on the left side of the table below. The tax rate in our model is 21%. This is the current corporate tax rate in the United States. While Nvidia's effective tax rate was lower in the last year, our model covers a period of the next five years where the tax rate might increase. This is why it makes sense to assume a higher rate in the model. We made this model at a time when Nvidia was trading at $116.91 per share, and the long-term debt and the cash reserves data was added from the latest earnings report. The perpetual growth rate is 3%, which is close to the historical inflation and GDP rate. The discount rate in our model is 10.28%. The calculation for the discount rate is presented in the middle and right columns of the table, which can be seen below. First, we calculated the cost of debt and the after-tax cost of debt by using Nvidia's TTM financial data. Then we calculated the cost of equity by using the risk-free rate of 3.86%, the beta of 1.68, and the inflation-adjusted market-return rate of 7.70%. In the end, we weighted Nvidia's debt profile with its equity and figured out the discount rate. Once we filled in the entry data, we moved on to forecasting Nvidia's growth in the upcoming years. The sales growth rate of 106% in the model is similar to the overall expectations for the current fiscal year. While the pace of growth is expected to subside going forward, the company still had strong growth at the beginning of this fiscal year, which is why in FY25 we'll still see a triple-digit rate for sales. After that, a normalization of the growth rate is expected to happen and is reflected in our model. The EBIT as a percentage of sales is 62% in the model, which is close to the company's historical performance in recent months. The tax rate is 21%, while the assumptions for the rest of the metrics closely match up with Nvidia's historical performance. Our forecast helped us figure out the present value of Nvidia's FCF in the upcoming years. We were then able to calculate the cumulative value of Nvidia's FCF, apply the discount and perpetual growth rates, and figure out the terminal value and the present value of Nvidia's terminal value. We then added Nvidia's present value of the terminal value to the cumulative present value of its FCF to calculate the company's enterprise value, which in our case is $1.94 trillion. Once the enterprise value was found, we then added Nvidia's cash, subtracted the long-term debt from it, and arrived at an equity value of $1.97 trillion. After that, we divided Nvidia's equity value by the number of its shares and arrived at the intrinsic value of $79.33 per share. This means that Nvidia's stock is overvalued by around 32%. That's why we believe that Nvidia is a SELL right now. It's also important to note that at a market cap of nearly ~$2. 65 trillion, it's hard to justify Nvidia's current price, even after the recent decline caused by the latest earnings report. The whole generative AI market under one of the most optimistic assumptions is expected to be worth $1.3 trillion in 2032. In addition, the overall cloud market could be worth only as much as $1.8 trillion by 2029. Considering this, Nvidia's current valuation today simply doesn't make a lot of sense to us. Risks To Our Bearish Thesis Despite all the negativity, several risks could undermine our bearish thesis. The most obvious is the potential greater ramp-up of sales in the second half of the year, which would make the market excited again about Nvidia's growth prospects. The potential delay of Blackwell shipments could be offset by the potential increase of the company's Hopper series GPUs, especially since their supply and availability have improved. This could ensure that Nvidia performs well in Q3, and makes investors once again excited about investing into its shares if the beat is significant. We also know from the latest conference call that the demand for Blackwell is above supply. If no further delays are announced, then when the Q3 report comes out, Nvidia could also announce a far more optimistic guidance for Q4, which could help revive the stock's momentum later this year. Final Thoughts Nvidia's biggest issue is that its stock is priced for perfection, and any earnings report that includes an earnings beat without an impressive margin and relatively disappointing guidance would likely prevent a further appreciation of shares. This has been the case with the latest earnings report and the subsequent reaction of the market to it. The macro challenges are also not going anywhere away, and potential catalysts might not even materialize in the end if the company fails to grow its sales due to potential supply issues or delays. That is why Nvidia's upside is not guaranteed and until the Q3 numbers come out, its shares could continue to experience weakness. This is why at the current price, Nvidia stock is a SELL for us. Bears of Wall Street is a community of asset managers and traders who take a pragmatic approach to valuing companies. Bears of Wall Street provide unique research with a bearish sentiment on overvalued or weak companies with declining businesses and poor growth perspectives - companies whose likely depreciation can be capitalized on. Analyst's Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Nvidia Stock: Goldman Sachs' Hilarious Downside Case (NASDAQ:NVDA)

Looking for higher risk/reward options trading ideas? I offer this and much more at my exclusive investing ideas service, Conservative Income Portfolio. Learn More " Recency bias. We all have it to an extent. The way it plays into the stock market is that you see the most recent price and compare it to where it was a few weeks back. So "cheap" or "expensive" becomes a relative concept to where prices were. It unhinges from valuation. To be fair, nothing has remotely been about valuation in the past 18 months. But we are going to look at one bank's attempt to put a fair value on a stock. Nvidia Corporation (NASDAQ:NVDA) We are not going to give you the background on the company or what it does. If you need that, you have come to the wrong place. Instead, we are going to just focus on a tiny little concept called margins. Goldman Sachs (GS) recently came out with their valuation model on NVDA and said it would be fairly valued in a range of $47-$230, depending on how things play out. The company (NVDA, not GS) has about 25 billion shares outstanding. So GS, in essence, is saying fair value could be off by about $4.5 trillion between the two extremes, give or take. Sounds legit. But the picture above is very instructive, as despite knowing the obvious pitfalls of assigning a multiple on a single year's earnings, GS is going all in on its valuation based on that. In its base case, GS assigns a 31X multiple, and in its Ultra-Bear case, it runs with a 25X multiple. What's Wrong With This Picture? Well, everything is wrong, but we are going to focus on margins. In one of the funniest takes we have seen since Safehold (SAFE) was valued at 200X cash flow, GS moves gross margins in a two percentage range. Between sales of $244 billion annually and $88 billion annually, the gross margin changes only from 73.8% to 71.7%. Even in monopolies, this would be unheard of. If revenues are declining by 31% year over year, you can bet margins will take a vertical plunge. This is hardly a unique concept, and it is certainly something the darling of bubble-land is quite familiar with. In fact, the 71.7% number was first breached on the upside about a year back. Before that, NVDA did not in its entire history come close to that number in its peak quarters. You can see above the peaks for margins were in the mid-60s. What is also observable here is that the drops are fairly steep. The 2018 crypto cycle peaking threw margins down 10 percentage points. The 2022 oversupply on data center chips dropped them by 20 percentage points. NVDA was a baby in 2000 during the dot-com era by we can still see the near one-third contraction in gross margins. 2008-2009 again saw a one-third contraction. So every bit of history tells you that whatever your start point, once revenues contract even marginally, your gross profit margins do a deep dive. Yet, we are seeing valuations being based on those margins holding higher than what we have ever seen before. Why is that? The answer lies in the picture itself. Putting in anything reasonable in either the gross margins or P/E multiples creates a terrible downside scenario. For example, in the two bear cases shown above, if we input 50% gross margins, our earnings (including stock-based compensation) drop is fairly steep. 50% gross margins may sound really low, but once everyone has their chips, will they be buying a second one? Revenue rates for AI are running at a fraction of the capex rate. By our estimate, revenues need to increase 100-200 fold to justify what has already been invested. We have not even accounted for Alphabet Inc. (GOOG), Intel Inc (INTC) or Advanced Micro Devices, Inc. (AMD), making a successful competing chip. Valuation & Verdict It is fairly obvious that NVDA's EPS growth rate has peaked. The revenue growth rate has also peaked. What we are saying now is that there is no "cycle" anymore, and we will all be eating AI chips for breakfast, independent of anything else. Remember that in every past downturn, NVDA's sales and gross margins eventually cracked. It also did not have 3 out of 5 top customers, trying to create competing chips back then. Will we have a recession? Certainly. The data is lining up for it. And when that does and sales do start declining and profits start evaporating, where will you value this? Definitely not at 30X sales. In fact, NVDA's trough multiples have been at, 2X sales. It is fairly difficult to see on that chart because the scaling of the right-hand side destroys your visuals. Let's run the same chart just until 2015 so we get a glimpse of how this might play out. Of course, 2X sales would imply some rather unfathomable downside levels, even if NVDA grows its sales. Some may argue that the cash made during the boom years will help the company. It certainly may provide some buffer, but so far NVDA is spending on buying back its stock at extremely bad valuations. The only people who likely make it rich, even at the end of this cycle, are the NVDA employees. Assuming they cash out the stock options. We will have to see how this plays out. In general, whenever the parabola breaks, the stock is usually done. It looks like it broke. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways. Source: Bob Farrell. Take a look at the lithium chart below. Keep in mind this headline at the exact peak of lithium prices. The world could face lithium shortages by 2025, the International Energy Agency (IEA) says, while Credit Suisse thinks demand could treble between 2020 and 2025, meaning "supply would be stretched." Source: We Forum. Yes, it will happen here as well. Please note that this is not financial advice. It may seem like it, sound like it, but surprisingly, it is not. Investors are expected to do their own due diligence and consult a professional who knows their objectives and constraints. Are you looking for Real Yields which reduce portfolio volatility? Conservative Income Portfolio targets the best value stocks with the highest margins of safety. The volatility of these investments is further lowered using the best priced options. Our Enhanced Equity Income Solutions Portfolio is designed to reduce volatility while generating 7-9% yields. Take advantage of the currently offered discount on annual memberships and give CIP a try. The offer comes with a 11 month money guarantee, for first time members. Trapping Value is a team of analysts with over 40 years of combined experience generating options income while also focusing on capital preservation. They run the investing group Conservative Income Portfolio in partnership with Preferred Stock Trader. The investing group features two income-generating portfolios and a bond ladder. Trapping Value provides Covered Calls, and Preferred Stock Trader covers Fixed Income. The Covered Calls Portfolio is designed to provide lower volatility income investing with a focus on capital preservation. The fixed income portfolio focuses on buying securities with high income potential and heavy undervaluation relative to comparatives. Learn more. Analyst's Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Nvidia Stock: Pullback Or Bubble Peak? (NASDAQ:NVDA)

And even when calculating with optimistic growth assumptions, NVIDIA remains to be overvalued. In the past two months, it seems like NVIDIA Corporation (NASDAQ:NVDA) investors had to confront themselves with a chart picture that is rather unknown to them. The stock entered bear market territory two times in a row and is now trading about 21% below its previous all-time high. Considering that the stock increased more than 10 times in value in only a few quarters, this might feel strange for investors. Suddenly, Nvidia is generating different headlines like "NVIDIA is now in bear market territory" and the recent drop was the biggest single-day market cap drop in history. The question right now is, whether this 20% decline is only a pullback and therefore a buying opportunity that we should take advantage of, or if this is the beginning of the end. Or to put it less dramatically: Did we see the bubble peak for Nvidia already, and will the stock continue to decline further? In the following discussion, we will answer the question if you should buy Nvidia stock now. We start by looking at the last few years and try to look at the bigger picture. As already mentioned above, Nvidia profited like almost no other company from the AI hype that started in late 2022 when OpenAI released a much-improved version of ChatGPT. Since then, the stock increased more than 10x and Nvidia became the darling of Wall Street and outperformed the S&P 500 (SPX) or the Nasdaq-100 (NDX). But in the last few weeks, the picture suddenly turned, and Nvidia was not rushing from an all-time high to an all-time high. Instead, Nvidia was declining rather steeply. This is not astounding, as the overall stock market also declined in July and early August, and Nvidia just declined steeper than the overall market. And companies like Nvidia which are trading for higher valuation multiples and increased at a much higher pace than the overall market often decline much steeper in such a scenario. Simply put: Companies like Nvidia are much more volatile than the overall market - meaning in a bull market these companies clearly outperform, but in a bear market such stocks typically decline very steeply in a very short timeframe. And while corrections are a natural part of the stock market and should be nothing to worry about, we can at least point out that the current decline was the steepest for Nvidia since 2022 when the rally began. I wrote my first article about Nvidia in June 2022 at a point when the stock price was already cut in half and Nvidia was already in its 66% decline (see chart above). In the article, I argued that the decline was more than justified and did not really see any upside potential for Nvidia. Back then, the stock was trading for $15.36 (or pre-split for $153.60). In December 2022, I wrote a second article when Nvidia was trading more or less for the same price (meanwhile, the stock declined to about $10). And while I wrote about the huge downside risk I saw for Nvidia, the stock was already in the early stages of the massive rally we saw over the last two years. I don't know how many people already saw what was coming, but I was clearly wrong in December 2022 and could not foresee the huge demand and exploding revenue Nvidia would report in the coming quarters. And while I still rated the stock a "Hold" in previous articles, I wrote my first article about Nvidia in which I rated the stock as a "Sell" in March 2024. The article was titled "Nobody rings a bell at the top" and in the article I indicated that a top might be very close. Meanwhile, the stock increased 58% and right now, the stock is still trading about 20% higher. In June 2024, I wrote another article called "This could be the top." Since then, the stock has declined about 14%. Now let's look at the last quarterly results Nvidia reported on August 28, 2024. And not only did Nvidia beat analysts' estimates once again - revenue by $1.31 billion and non-GAAP earnings per share by $0.04 - but the company is also growing in the triple digits year-over-year. Revenue increased from $13,507 million in Q2/24 to $30,040 million in Q2/25 - resulting in 122% year-over-year growth for the top line. Operating income increased 174% year-over-year from $6,800 million in the same quarter last year to $18,642 million this quarter. And diluted earnings per share increased from $0.25 in Q2/24 to $0.67 in Q2/25 - resulting in 168% year-over-year bottom-line growth. And finally, free cash flow increased from $6,048 million in the same quarter last year to $13,483 million this quarter - resulting in 123% growth year-over-year. While most metrics also improved quarter-over-quarter, free cash flow declined compared to the previous quarter. When looking at the different segments - or revenue by market platform - we can see that all five contribute to growth in the second quarter. And when looking at the smaller segments, Gaming is the most important as it is generating $2,880 million in revenue in Q2/25 and grew 15.8% year-over-year. Professional Visualization generated $454 million in revenue in the second quarter and grew 19.8% compared to the same quarter last year. And although both segments are responsible for only about 1% of total revenue, Auto increased revenue from $253 million in the same quarter last year to $346 million this quarter - 36.8% year-over-year growth. OEM & Other grew 33.3% year-over-year, but it is responsible for only $88 million in quarterly revenue. But like in the last few quarters, it is especially one segment which is responsible for the triple-digit revenue growth in the last few quarters - Data Center. And in Q2/25, the segment once again reported extremely high growth rates. The segment generated $26,272 million in revenue and compared to $10,323 million in the same quarter last year it resulted in 154% YoY growth. And at this point, the segment is responsible for 87% of total revenue. And when looking at the numbers the Semiconductor Industry Association published recently, semiconductor sales are growing at a solid pace. In July 2024, global semiconductor sales grew 18.7% year-over-year with Europe lagging but especially America growing at a high pace (40% YoY growth). And it is nonsense to interpret some weakness in the current numbers. Growth rates are rather accelerating right now. Nevertheless, we can clearly see in the chart - if we did not already know this beforehand - that the semiconductor industry is extremely cyclical and declines of 10% or 20% are not uncommon. Currently, declining sales for Nvidia seem to have many bulls like putting a quart into a pint pot, but it would be extremely foolish to think Nvidia overcame the cyclicality of the semiconductor industry. And just because Nvidia was at the right place at the right time and profited from the AI hype like no other business does not mean it will be able to overcome the cyclicality in the semiconductor industry. When looking at Nvidia numbers in the past few quarters, we see growth rates slowing down for revenue, operating income and earnings per share. Of course, we should not ignore that we are still talking about triple-digit growth rates. For the third quarter, Nvidia is expecting revenue to be around $32.5 billion, which would result in about 80% top-line growth and still about 8% quarter-over-quarter growth. And not only are growth rates slowing down (which is not surprising, as these extremely high-growth rates are unsustainable), but the gross margin is also declining: It already declined in the second quarter and will probably continue to decline in the third quarter. Looking at earnings and revenue revisions, it might also seem like analysts are turning on Nvidia and are starting to lower expectations for the years to come. At this point, it is difficult to tell, and it rather seems like fishing for negative clues, but analysts lowering expectations might go hand in hand with sentiment turning. It also seems worth mentioning that Wall Street is still extremely bullish about Nvidia (46 out of 60 analysts still see Nvidia as a "Strong Buy"). Seeking Alpha authors seems more realistic (at least in my opinion) and rate the stock rather as a "Hold" at this point. It was also reported recently that CEO Jen-Hsun Huang sold millions of shares. While the first impulse would be that selling shares is a bearish sign, we should not ignore that management is usually rewarded with stock options and receiving shares, which are often sold now and then. Interpreting the selling of shares every time as a bearish signal would be a huge mistake. But the biggest remaining problems for Nvidia are the valuation multiples and price the stock is trading for. It is seldom a concern if growth rates slow down (and Nvidia is still growing at extremely high rates). And cyclicality by itself also does not make stocks a bad investment. The issue is always the fundamental picture in combination with the stock price. Only when the stock price can't be justified anymore it will become problematic. As always, we can start by looking at the simple valuation multiples to get a first feeling if a stock is expensive (and if so, how overvalued a stock actually is). In the case of Nvidia, we can clearly argue that the business was growing into its sky-high valuation multiples and the stock is now trading for much more reasonable valuation multiples than a few quarters ago. Nevertheless, Nvidia is still trading for 50 times earnings and for 57 times free cash flow. Although we can argue that this is slightly below the 10-year average for the P/FCF ratio as well as the P/E ratio, I would argue that Nvidia is still rather expensive. But as always, simple valuation multiples can only give a first hint of what an intrinsic value for the stock might be. For a more precise number, we should rather use a discount cash flow calculation to determine an intrinsic value the stock should trade for. As always, we are calculating with a 10% discount rate (as 10% annual return is what we like to achieve at least). Additionally, we calculate with the last reported number of diluted shares outstanding (24,848 million), and as basis for our calculation, we can use the trailing twelve months free cash flow (which was $46.79 billion). Usually, we now must make assumptions about growth rates and the free cash flow the business can generate in the years to come. But in the case of Nvidia, we can once again look at the stock from the opposite direction. To be fairly valued, the company has to grow its free cash flow between 22% and 23% in the next ten years, followed by 4% growth until perpetuity. In the past, I often calculated with 6% growth until perpetuity (and I still think it is possible to justify these higher terminal growth rates for high-quality businesses). Nevertheless, it also seems reasonable to be a little more cautious and follow the recommendations of the CFI (and others) and use a lower terminal growth rate, but due to the high-quality business, 4% seems certainly reasonable. When looking at the last ten years, Nvidia was growing its revenue with a CAGR of 30.88% and earnings per share grew 51.69% on average in the past ten years. Keeping these growth rates in mind, 23% growth in the next ten years should be reasonable. However, we must not forget that Nvidia is a cyclical business, and the last two years were an exceptional opportunity for Nvidia (and one which probably won't repeat in the foreseeable future). Competition will increase, and demand from companies will likely decline (especially with the risk of the United States headed for a recession). And a huge problem for Nvidia will be the contracting margins. It seems likely that Nvidia will return to about 60% gross margin and not almost 80% as in the last few quarters. And when taking all these aspects into account, I don't think Nvidia will grow the bottom line (or free cash flow) by 23% annually for the next ten years and the stock is just overvalued at this point. Let's pick up the question from the beginning again: Is Nvidia at a buying point, and should we use the current setback to load up the truck and participate in one of the best investments of the last few years? Or has the bubble reached its peak already, and we will only see the unwinding of the bubble in the upcoming years. The question is extremely difficult to answer. We know that hypes and irrational exuberance can last longer than anticipated and ruin people shorting against. But I certainly know that I don't want to buy the stock as the risk of a "lost decade" for Nvidia is extremely high and people holding the stock might consider selling (at least a part of) the position. And if sentiment turns, it is also extremely difficult to determine how far the stock might fall. Stocks that are driven by sentiment extremely are often exaggerated in both directions - a bubble peak is followed by a complete (and also unjustified) collapse of the stock price.

Nvidia's $50 Billion Share Buyback Is the Ultimate Smoke-and-Mirrors Campaign | The Motley Fool

A hefty buyback program won't mask mounting red flags for Wall Street's artificial intelligence (AI) darling. For the better part of two years, artificial intelligence (AI) has been the hottest thing since sliced bread on Wall Street. The prospect of AI-driven software and systems learning without human intervention gives this technology broad-reaching utility in almost every sector and industry. Though we've seen no shortage of next-big-thing trends come and go on Wall Street since the advent of the internet three decades ago, none have offered as large of an addressable market as artificial intelligence. Based on a report issued by researchers at PwC, AI is forecast to add $15.7 trillion to the global economy in 2030. While a number of stocks have soared on the heels of the AI revolution, no company has benefited more than semiconductor goliath Nvidia (NVDA 1.53%). In the blink of an eye, Nvidia's AI-graphics processing units (GPUs) became the undisputed top choice by businesses looking run generative AI solutions and train large language models. Nvidia's H100 chip has been backlogged due to excess demand, while its successor chip, Blackwell, is estimated to be sold out well into 2025. Blackwell is set to make its debut during the first quarter of next year. The beauty of AI-GPU demand overwhelming supply is that it puts the ball completely in Nvidia's court when it comes to pricing power. Nvidia's GPU hardware has consistently been priced at a 100% to 300% premium to competing chips -- and businesses are eagerly lining up to pay this higher price. Over the last six quarters, Nvidia's adjusted gross margin has expanded by more than 10 percentage points, largely thanks to this otherworldly pricing power. During the fiscal second quarter of 2025 (ended July 28), Nvidia delivered sales growth of 122% and reported just a hair over $30 billion in sales. For some context on just how quickly Nvidia has ramped its sales, it generated a little north of $6 billion in revenue for the fourth quarter of fiscal 2023. But while it's looked every bit like Wall Street's textbook growth stock, Nvidia threw the ultimate smoke-and-mirrors curveball to investors with one aspect of its latest report. With professional and everyday investors looking for Nvidia to report blowout second-quarter sales growth and hype up its future hardware and software offerings -- the company's CUDA software toolkit has played a key role in keeping enterprise clients loyal to its AI-GPUs -- Nvidia delivered the news that its board had approved a $50 billion share repurchasing program. This comes atop the $7.5 billion remaining from a previously announced buyback allotment. The purpose of buyback programs is to signal to investors that a company's board believes its stock is being undervalued by Wall Street and investors. Furthermore, buying back stock has the ability to reduce a company's outstanding share count, which can provide an upward lift to earnings per share (EPS). In other words, it can make a stock more attractive to fundamentally focused investors. However, devoting up to $50 billion to a buyback program isn't something you'd expect from a hypergrowth company that's expected to spend a small fortune on researching and developing new products and services tied to the AI revolution. One reason this is a complete smoke-and-mirrors move is because the company is dangling the prospect of repurchasing an additional $50 billion worth of its stock at a time when insiders are selling their shares at a historic pace. Since the midpoint of June, CEO Jensen Huang has disposed of around $600 million worth of his company's stock. Net insider selling activity has topped $1.6 billion over the trailing-12-month period. To add to the above, no insider has purchased a single share of their company's stock on the open market since Chief Financial Officer Colette Kress bought 200 shares in (wait for it...) December 2020! If this isn't egregious enough, Nvidia is attempting to signal that its stock is undervalued at a time when its shares are historically pricey, relative to its trailing-12-month (TTM) price-to-sales (P/S) ratio. Throughout history, you can count on one hand how many times we've witnessed market-leading companies approach a TTM P/S ratio of 40. The last time this occurred, both Amazon and Cisco Systems went on to lose around 90% of their respective value following the bursting of the dot-com bubble. Dangling the carrot of buybacks at a time when Nvidia's valuation is historically expensive is the ultimate smoke-and-mirrors campaign. Looking beyond Nvidia's head-scratching share repurchase announcement, investors should also note the warning history provides when it comes to next-big-thing innovations, technologies, and trends. While there's no question that big dollar figures tied to large addressable markets can lead to emotion-driven euphoria on Wall Street, history has repeatedly shown that every highly touted innovation, technology, and trend over the last 30 years has, eventually, navigated its way through an early stage bubble. The catalyst for this bubble is investors who consistently overestimate the adoption and/or utility of next-big-thing trends. Although artificial intelligence has a promising future, the simple fact that most businesses lack a well-defined game plan to grow their sales and increase their profits is a glaring warning that investor expectations are outpacing reality. History also tells us that every game-changing technology has needed time to mature. It took more than a half-decade for business-to-business commerce to find its footing following the proliferation of the internet in the mid-1990s. It's going to take time for businesses to figure out what they have with AI and how to best utilize the technology to meet the needs of their customers. Long story short, a $50 billion share repurchase program doesn't hide the fact that Nvidia's insiders are big-time sellers, the stock is historically pricey, and no highly touted innovation has escaped an early innings bubble for three decades.

'Didn't Take Much For Nvidia To Get People Excited About AI,' Says Strategist, After Jensen Huang Talks Up AI's Potential Beyond Data Centers - NVIDIA (NASDAQ:NVDA)

Nvidia Corp. NVDA shares jumped over 8% on Wednesday, taking the broader market and the tech sector higher along with them, and two experts weighed in on Nvidia-led recovery. Nvidia - AI Trades' Lifeline: After a strong move to the downside in initial reaction to the August consumer price inflation numbers, stocks came back up strong and it didn't take much for Nvidia to get people excited about artificial intelligence, said B Riley Wealth Chief Market Strategist Art Hogan in an interview with Yahoo Finance. The upside came amid comments from a multitude of ongoing conferences, he said. Following the selling pressure seen in the space over the course of the past two months, there was a nice rebound by AI stocks that took the rest of the technology group up, especially the AI adjacent names, he said. Hogan also dismissed the market decline in the morning as an overreaction, as he said coming into the CPI print, the consensus expectation was for a 25-basis-point cut at the September Federal Reserve rate-setting meeting. The slightly hotter-than-expected CPI print only increased the odds of the cut of that magnitude from 70% to 85%, he added. "I think that the rally in the afternoon probably makes a whole lot more sense," the strategist said. Delving into the comments from Nvidia CEO Jensen Huang that triggered the rally, Hogan noted that the semiconductor space was down about 23% following the sell-off seen in August and the September to-date period. "So, you have got an oversold group. It doesn't take much of a push to get investors back and excited about a group that was trading significantly higher than this, just two months ago," he said. Huang's commentary, the strategist said, was more about hinting at the other applications of AI, beyond data centers and that people are looking only at the tip of the iceberg. Hogan noted that all hyperscalers talked about their ongoing capex and about 80%-90% of that going to Nvidia. "So clearly oversold stock, oversold group... commentary from the guy who runs the place and it didn't take much to start the fire," he added. See Also: How To Buy Nvidia (NVDA) Stock Abounding Opportunity: Altimeter's Brad Gerstner, an investor and hedge fund manager, also weighed in on Huang's comments at the Goldman Sachs Communacopia and Technology Conference. He noted that Nvidia has been among his fund's biggest holdings from 2023 onwards and is currently its biggest holding. The hedge fund manager conceded that there have been a lot of concerns over the last couple of months about a potential AI air pocket as Alphabet, Inc.'s GOOGL GOOG CEO Sundar Pichai and Microsoft Corp.'s MSFT Satya Nadella said they would err on the side of caution and over-invest rather than under-invest in AI. Some recent developments have been encouraging, he said, adding that Elon Musk and Google co-founder Sergei Brin recently said at an AI summit in Los Angeles that the pace of AI is faster than any other tech development they have seen in their lifetimes. He also cited comments from Anthropic's co-founder and CEO Dario Amodei and Microsoft CTO Kevin Scott at the Goldman Sachs conference that demand is continuing to outstrip supply. The same sentiment was echoed by Huang and he took the lingering concerns about a potential Blackwell 200 delay off the table, Gerstner said. B200 is on target for fourth quarter ramping and production, he added. After the price-earnings multiple fell in the aftermath of the recent sell-off, "people are starting to lean back into some of the big tech ahead of the election," Gerstner said. He noted that his fund added to its Nvidia position, almost doubling its stake when the stock was disrupted in August. "Again it has been very volatile. I think it will continue to be volatile while the people wait for that print in the fourth quarter," he said. To a question on when he sees all the huge AI investments bearing fruit, Gerstner said a critical thing to remember is Nvidia is not just in the business of generative AI. "What Jensen has reminded us is we are going to have to replace the trillion dollars of CPU-driven data centers. This is stuff that drives things like data processing, and everyday workloads, he said, adding that there is a potential trillion dollars revenue opportunity over the next four years of generative AI workloads and a trillion dollars of CPU replacement. Also, Huang spoke about the opportunity in the data processing segment, Gerstner said. Nvidia ended Wednesday's session up 8.15% at $116.91, according to Benzinga Pro data. Although the stock is trading off its late-June highs (intraday) of $140.76, it is up 136% year-to-date. Read Next: Nvidia Shares Riding On Huge AI Tailwind, Says Portfolio Strategist: Why Expert Says Stock Will Stay On An Upward Path For Next 2-3 Years Image via Shutterstock Market News and Data brought to you by Benzinga APIs

Nvidia CEO Jensen Huang Eases Investor Concerns On AI Demand, Blackwell Timeline And More: 'Everybody Is Counting On Us' - NVIDIA (NASDAQ:NVDA)

Analysts highlight what the comments mean for Nvidia and the AI sector. NVIDIA Corporation NVDA CEO Jensen Huang gave updates on AI demand, Blackwell products and return on investment during a speech at a Goldman Sachs technology conference Wednesday. Analysts and investors come away encouraged by the update and the timeline of Blackwell. Goldman Sachs on NVDA: Customer return on investment, a competitive moat and the ongoing Blackwell ramp were among the key highlights from Huang's presentation for Goldman Sachs analyst Toshiya Hari. The analyst, who has a Buy rating and $135 price target on NVDA, said Huang highlighted the current rate of innovation. "He noted that the densification and acceleration of the $1 trillion data center infrastructure installed base alone would drive growth over the next 10 years, as it would deliver material performance improvement and/or cost savings," Hari said. One concern about substantial AI spending by companies has been the return on investment. Huang highlighted the potential revenue benefits of such investments. "Mr. Huang shared that hyperscale customers can generate $5 in rental revenue for every $1 spent on Nvidia's infrastructure, given sustained strength in the demand for accelerated computing." Hari said Huang reiterating the company's timeline for Blackwell-based products to ship in the fourth fiscal quarter was among the biggest highlights of the Nvidia CEO's speech. Wedbush on NVDA: Wedbush analyst Matt Bryson said Huang expressed optimism as investors remain concerned about potential Blackwell delays. The analyst also highlighted a potential deal by the U.S. government with Saudi Arabia for chip exports. "In a different report by Reuters, the U.S. government is said to be getting closer to allowing NVDA to export chips to Saudi Arabia, which would help the country train and run powerful AI models," Bryson said. Huang's commentary at the event should be "reassuring," Bryson added. Wedbush has an Outperform rating on Nvidia with a $138 price target. Read Also: Brad Gerstner Bought Nvidia Stock When 'Everybody Said Sell': Now He's Buying Apple Stock At All-Time Highs Brad Gerstner on NVDA: Altimeter Capital founder and CEO Brad Gerstner was also present for Huang's speech and shared his thoughts with CNBC after the event. "Demand is continuing to outstrip supply," Gerstner said of the artificial intelligence sector. The investors said Huang's speech and recent commentary from technology leaders supports continued growth of AI and should alleviate some investor concerns. "It is our biggest holding today," Gerstner said of Nvidia stock. The investor said he added to his Nvidia stake when shares were disrupted in August, nearly doubling his position. Nvidia is not limited to generative AI; it also sees multiple trillion-dollar opportunities in AI and data center CPUs, Gerstner said. "The most important company in compute today," the investor added of Nvidia. Why It's Important: Huang said demand for Blackwell chips is so immense that customers are becoming frustrated and tensions are rising due to the supply. "The demand on it is so great, and everyone wants to be first and everyone wants to be most," Huang said. "We probably have more emotional customers today." Huang said Nvidia is "trying to do the best we can." The Nvidia CEO thanked suppliers like Taiwan Semiconductor Manufacturing TSM, who is also trying to keep up with supply. When discussing concerns of supplies being impacted by geopolitical tensions, Huang said the company could switch suppliers. Demand for Nvidia products and the high expectations from investors wasn't lost on Huang during his speech. "We have a lot of people on our shoulders, and everybody is counting on us." NVDA Price Action: Nvidia shares trade at $117.24 versus a 52-week trading range of $39.23 to $140.76. Nvidia stock is up 144% year-to-date in 2024. Read Next: Jensen Huang Added As Much To His Wealth In 2024 As Musk, Bezos, Gates Combined Photo: Shutterstock Market News and Data brought to you by Benzinga APIs