Nvidia Stock Is Rising—and the AI Trade Has a Fighting Chance

Nvidia chips are the favored choice for training artificial-intelligence models. (Dreamstime)

Nvidia stock was up a hair on Thursday. Optimism about the chip maker’s coming earnings offset concerns over whether momentum for the artificial-intelligence trade can be sustained.

In midmorning trading, shares were up 0.1% at $175.52. The stock fell 0.1% on Wednesday. Chip rivals Advanced Micro Devices was down 0.2% and Broadcom was down 0.3%.

The stock isset to record its first two-week losing streak since April on fears of an AI bubble, after OpenAI CEO Sam Altman warned that investors had become “overenthusiastic.”

Meta Platforms has frozen hiring in its AI division after a months long recruiting spree of top talent, according to The Wall Street Journal.

“While we think some caution may be warranted in the more cyclical parts of tech, we remain confident in the broader AI sector’s long-term growth and resilience,” wrote Mark Haefele, chief investment officer at UBS Global Wealth Management in a research note.

Haefele noted cloud-computing revenue at the three largest platforms
grew by an average of more than 25% year over year in the June quarter and large-cap technology company earnings have been solid.

Nvidia will provide crucial context when it reports earnings next week, on Wednesday. The significant doubt hanging over the results is whether its financial forecasts will include sales in China, which require license approvals for H20 chips to be sold and for the company to give the U.S. government 15% of the revenue generated.

Susquehanna analyst Christopher Rolland raised his target price on Nvidia to $210 from $180 and reiterated a Positive rating, in a research note previewing the earnings.

“While we are raising our estimates as checks around the supply chain remain solid, we note that we are slightly below the Street for October as some estimates reflect H20 revenue (we continue to exclude as we await formal guidance from the company),” Rolland wrote.

Rolland noted H20 chip sales in China could generate about $8 billion of additional revenue in the second half of this year.

Similarly, Jefferies analyst Blayne Curtis tempered any near-term expectations for H20 China revenue.

“We don’t expect NVDA to add in much, if any, China sales, as there seems to be a deal in place for the licenses,” Curtis wrote. “We have yet to see an official green light.”

The China business could prove controversial both in Washington and Beijing.

Chinese regulators are looking to dissuade domestic technology companies from buying Nvidia hardware after Commerce Secretary Howard Lutnick said the aim was to get China’s companies “addicted” to American technology, according to the Financial Times on Thursday.

Write to Adam Clark at adam.clark@barrons.com