Nvidia’s stock heads for new all-time high

Nvidia’s stock is blasting forward again, edging closer to an all-time high. Investors are riding a wave of relief after Nvidia squashed fears about product delays and long-term growth.

The stock is up 13% so far this month and could soon hit its first record close since June. Right now, it’s the second-best performer in the S&P 500 Index for 2024.

This comeback comes off the back of positive updates from CEO Jensen Huang. Its latest chip, Blackwell, is finally in full production after some delays.

Huang’s bold statement that demand is “insane” erased earlier market jitters, making investors breathe easier. This even prompted analysts at Morgan Stanley to report that Blackwell orders are already booked out for the next 12 months.

Business is “robust” with visibility extending far into the future, they said. Nvidia’s stock have jumped 2.2% so far today.

AI demand fuels Nvidia’s stock surge

Major companies, including Microsoft, are sticking to their AI initiatives, reinforcing Nvidia’s lead in the space.

Microsoft alone is expected to boost its capital expenditure (capex) by a staggering 30% to around $58 billion in fiscal 2025. As AI continues to dominate tech spending, Nvidia will continue to cash in big.

Taiwan Semiconductor Manufacturing Co. posted strong AI sales recently, which only added to the AI momentum. And OpenAI’s massive valuation, hitting $157 billion, put even more fuel on the fire.

OpenAI rolled out an AI model capable of reasoning, a key development in the AI space, and Nvidia stands to benefit as reasoning-based AI is highly compute-intensive.

Analysts predict Nvidia’s revenue will more than double in this fiscal year and rise another 44% next year, according to data from Bloomberg.

Activity in the options market is another sign of confidence. On Thursday, investors made a big move, buying calls to secure more than 30 million Nvidia shares at prices ranging from $150 to $189 through March. 

Nvidia closed at $134.80 on Friday, but these contracts show that some expect the stock to climb higher. These options won’t expire until after Nvidia’s Q4 earnings report, expected in February.

NVDA posts remarkable performance

And Wall Street is bullish on Nvidia, and estimates for earnings and profit have been pushed even higher in the last quarter. Its valuation is still within a reasonable range, trading around 37.5 times estimated earnings.

Sure it’s a premium compared to the Nasdaq 100 Index, but it’s below its five-year average and well under its peak in June when it was trading at 44 times earnings. It’s not cheap, but investors are buying Nvidia’s growth story.

The analysts are sticking with their “Buy” ratings on Nvidia. KeyBanc released a report estimating that Nvidia’s revenues from Blackwell alone could hit $7 billion in Q4.

Despite some fears about a possible slowdown in AI spending, the semiconductor industry keeps booming. Semiconductor sales rose by 28% in August compared to last year, and 15% compared to July, based on data from WSTS, as reviewed by JPMorgan.

Looking ahead, Nvidia is set to report earnings on November 19. Wall Street expects it to bring in $33 billion in revenue, up 82% compared to last year.

Bloomberg’s data shows that about 90% of Wall Street analysts who cover Nvidia have issued “Buy” recommendations. Nvidia’s reign as the AI chip king seems secure, even as competitors scramble to catch up.

One competitor that’s not backing down though is Advanced Micro Devices (AMD). AMD took aim at Nvidia with its latest AI chip, the Instinct MI325X, which was announced last Thursday.

The company plans to start production before the end of 2024. If AMD’s new chip is seen as a credible alternative to Nvidia’s GPUs, it could potentially bring some pricing pressure on it, which has enjoyed huge margins thanks to high demand.

For now, Nvidia dominates the data center GPU market with over 90% market share. AMD, historically in second place, is working hard to take a bigger slice of that pie.

The company claims the AI chip market could hit $500 billion by 2028, and it’s looking to capture its share of the gold rush.