Nvidia investors look to Huang’s CES speech to spark the next breakout

(Bloomberg) — Investors in Nvidia Corp. have high hopes that CEO Jensen Huang’s speech Monday will spark a fresh breakout in the chipmaker’s shares, which just finished near their first record since November.

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Huang is set to take the stage at the closely-watched CES trade show in Las Vegas on Monday evening. Nvidia has typically used the event to showcase consumer devices using its chips. However, investors today will focus on any comments on the Blackwell chip, which is considered to be Nvidia’s next major growth driver. Despite seeing strong demand, Blackwell has faced supply constraints due to production challenges that have slowed its rollout.

“The expectation is that demand for Blackwell will continue to be very strong,” said Matt Cioppa, portfolio manager at Franklin Templeton Equity Group. “This could bring the ultimate long-term opportunity for Nvidia back into focus for the market.”

Investors have reasons to be optimistic. Over the past six months, Huang’s comments about the demand for chips have boosted the stock. In October, he called Blackwell’s demand “crazy” and in November he said chips were shipping in the current quarter amid “very strong” demand.

Shares posted a monthly loss in December, but still gained 171% in 2024, making them the biggest single driver of the S&P 500 index’s overall gain by far. The stock is already up 11% this year, including a 3.4% gain on Monday. With a market capitalization of $3.66 trillion, it is Apple Inc. is close to being overtaken as the largest company; The iPhone maker has a market cap of $3.7 trillion.

Earnings disappointment

Yet the stock fell briefly after Nvidia’s Nov. 20 earnings report. The company’s revenue forecast failed to impress Wall Street, which had become accustomed to estimates that topped average estimates by a wide margin.

Shares have slowed as excitement about AI spending has spread to other areas of the semiconductor industry.

Broadcom Inc. Shares have surged more than 30% in the past few weeks after the chipmaker anticipated a boom in the market for AI components it designs for data-center operators. Marvell Technology Inc. Shares rose more than 20% after it reported better-than-expected earnings on demand for its custom AI chips.

Morgan Stanley analysts led by Joseph Moore likened the rallies in those stocks to asset transfers from Nvidia, whose shares sank for four straight days in the wake of the Broadcom report, shedding more than $200 billion in market value. came

Nvidia remains a top pick at Morgan Stanley, with analysts arguing the chipmaker will take market share this year. They are also seeing Huang’s keynote speech as a “positive event”.

“The messaging should be the same – demand for Blackwell is unprecedented, but supply is limited,” they wrote in a research note last month. “As of mid-year we remain comfortable that the focus in the second half of the year will remain on Blackwell, which will be the driving force behind revenue”.

High stakes

Jordan Klein, a tech-sector expert at Mizuho Securities, sees the CES event and Huang’s keynote as tests of near-term sentiment toward tech and risk appetite.

If the stock falls or sinks in the days following Huang’s comments, it would be “a modest negative in my view in January,” he wrote. Because tech earnings season won’t start until later this month, “investors will have little to gauge the fundamentals and outlook until then,” he said.

The stakes may be higher for Nvidia’s shares, as its rise has fueled valuation concerns. The stock trades at 19 times estimated earnings, making it one of the 10 most expensive Nasdaq 100 index components by this metric. It trades at close to 35 times estimated earnings, compared with around 24 for the Philadelphia Stock Exchange Semiconductor Index.

Emily Rowland, co-chief investment strategist at John Hancock Investments, remains positive on Nvidia and other big technology stocks, but braces for “a lot of chop” ahead.

“At some point in 2025 there’s going to be a ‘show me’ moment that’s going to confirm the story,” he said. “Valuation is clearly an issue, and it’s important to note how detailed the valuation is, even if the AI tailwind persists.”