Chip Stocks Soar as Investors Bet on AI Boom
The recent surge in chip stocks has sent Nvidia to a record high, with investors scooping up beaten-down shares in anticipation of a strong outlook for the industry. A robust demand forecast from Taiwan Semiconductor (TSM) has revived Wall Street’s enthusiasm for AI, overshadowing concerns about chip supplier ASML’s sluggish forecast and export caps on advanced AI chips.
Nvidia’s Market Dominance
Nvidia closed the week above $138 per share, bringing its market value to $3.39 trillion and cementing its position as the world’s second-largest company behind Apple. However, experts believe that Nvidia may soon surpass Apple to become the first Big Tech firm to reach a $4 trillion valuation.
Growing Confidence in AI Boom
“There’s no question about it,” says Ram Ahluwalia, Lumida Wealth Management CEO. “The demand for GPU chips is strong, and you’re seeing early adopters starting to get some ROI.” Nvidia CEO Jensen Huang has fueled the stock’s rally by describing demand for the new Blackwell chips as “insane.”
Underestimating Nvidia’s Growth Potential
Despite the stock’s dramatic outperformance, T. Rowe Price portfolio manager Tony Wang believes that investors still “continuously underestimate” Nvidia’s growth potential. He sees “exceptional” demand for AI making it “definitely possible” that the chip giant crosses the $4 trillion threshold first.
Earnings Insights
In the coming weeks, earnings from fellow Magnificent Seven companies will provide investors with better insight into Nvidia’s market dominance. Meta, Alphabet, Microsoft, and others have pledged to continue investing in AI, with spending totaling over $40 billion last quarter.
Generational Opportunity
BofA analyst Vivek Arya views Nvidia as a “generational opportunity” and has lifted his price target to $190, implying a rally of nearly 40% from Friday’s closing price. Arya cites capital expenditure commentary from top hyperscalers and Taiwan Semiconductor’s robust demand outlook as positives.
Crucial Test for Nvidia
Big Tech’s third-quarter numbers will be a crucial test for Nvidia and key to the stock’s momentum in the short term. Any disappointment in AI spending plans could lead to volatility for Nvidia and the broader chips market. However, experts remain bullish on Nvidia’s long-term prospects, with Niles Investment Management founder Dan Niles predicting that the stock will double over the next several years.
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