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A shift is apparent in market sentiment now that tech leader Nvidia ( Nasdaq: NVDA ) appears to be back in the driver's seat. Nvidia stock is soaring 11% on the day to the $115 per share level after sinking as low as $100 a few days ago. Nvidia's market cap has ballooned by $380 billion overnight after shaving off $1 trillion in market cap in about a month and a half. Indeed, July has been a roller coaster for Nvidia bulls, but they have found reason to be optimistic that it's smooth sailing from here. Here are three proof points that they are right and Nvidia is reversing its slide.
Need to Know Highlights
- Investors are breathing a sigh of relief now that Nvidia stock has reclaimed its rightful rally.
- Investors are also optimistic that the Fed could start cutting interest rates as soon as September.
- AMD's earnings demonstrate a tight chip market for the foreseeable future in what one strategist is calling a 'California Gold Rush.'
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AMD's AI Data Center Strength a Catalyst
Chip maker Advanced Micro Devices (Nasdaq: AMD ) is the rising tide lifting all boats today, including Nvidia stock. AMD reported a blockbuster Q2 earnings report, in response to which the stock has skyrocketed more than 10% to $153 per share, though it's subsided somewhat. AMD's data center revenue, which is where the AI magic happens, has grown more than twofold over the past year, an indication of the massive demand for its semiconductors. While Nvidia and AMD compete for market share as the No. 1 and No. 2 data center GPU providers, respectively, positive macro signals for AMD are also a win for Nvidia. As AMD Chair, President & CEO Lisa Su stated, "Overall, we remain quite bullish on the overall AI market. I think the market continues to need more compute."
'California Gold Rush'
Now that AMD has lifted its full-year AI chip revenue forecast by $500 million to $4.5 billion, it's clear demand is currently outpacing supply with no slowdown in sight for spending. AMD's Su predicts the tight conditions around AI chip supply will persist through 2025, serving as yet another catalyst for the industry including Nvidia. Creative Strategies CEO Ben Bajarin reportedly likened the current market dynamics to a "California gold rush" in which "suppliers of mining tools profited more than some miners."
Nvidia Earnings Anticipation
Nvidia will follow on the heels of AMD when it reports its earnings on Aug. 28. The company forecast fiscal Q2 revenue in the ballpark of $28 billion following record data center revenue of $22.6 billion in Q1.
Investors can expect comments from Nvidia CEO Jensen Huang to reflect a similar optimism as AMD's Su, who said, "The rapid advances in generative AI and development of more capable models are driving demand for more compute across all markets. Under this backdrop, we see strong growth opportunities over the coming years and are significantly increasing hardware, software, and solutions investments."
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