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.
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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.
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