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NVIDIA Jumps 4% on Monday - Here's Why Wall Street Is Suddenly Bullish Again

Eric Bleeker

Published: August 12, 2024 5:06 pm

It was a quiet day in the stock market. The Dow Jones fell .36% while the Nasdaq rose .21%. One bright spot amongst the sleepy market dady was technology stocks. NVIDIA (Nasdaq: NVDA) rose 4.06% while other companies like Super Micro Computer (Nasdaq: SMCI) saw strong performance as well.

Let’s dig deep into why AI stocks had a standout day and what events investors have to look forward to this month.

Need to Know News

• The S&P 500 was flat on Monday, but stocks in the AI space outperformed.
• The biggest winners were stocks like NVIDIA and Super Micro Computer. UBS issued a research note pointing toward limited delays for NVIDIA’s upcoming Blackwell platform and reiterated a ‘buy’ rating on the company with a $150 price target.
• With Wall Street reiterating that AI demand could boom through 2026 and many leading stocks at their cheapest levels this year, don’t miss our brand-new “The Next NVIDIA” report. It features an AI stock that just blew out earnings and we’re confident has 10X potential in the space. The report is complimentary and available for a limited time only, so don’t delay!

Markets on Monday

Here’s a rundown of the performance of major indexes on Monday:

• Dow Jones Industrial Average: 39,357.10 (-140.53 today)
• S&P 500: 5,344.39 (+.23 today)
• Nasdaq Composite: 16,780.61 (+35.31 today)
• Russell 2000: 2,059.85 (-21.06 today)

It’s noteworthy that the Dow Jones Industrial Average and Russell 2000 underperformed the Nasdaq today. Those two indexes dramatically outperformed the Nasdaq during periods of extreme volatility in July. The key cause of that outperformance was money flowing out of large technology stocks and Nasdaq funds and into pockets of the market that underperformed across the past 18 months like value stocks and small caps.

It appears this ‘sector rotation’ is now slowing, as the Russell has underperformed the Nasdaq in several recent trading sessions. The Russell 2000 jumped by nearly 12% between July 9th and 16th, but has now given up nearly all those gains and is up just 2% year-to-date. By comparison, even after recent choppiness, the Nasdaq is still up about 14% year-to-date.

The Biggest Reason for NVIDIA’s Strong Performance

The biggest factor driving AI stocks like NVIDIA and Super Micro today was likely Wall Street commentary. UBS issued a research note that had a few sections worth highlighting:

• UBS believes recent delays of NVIDIA’s Blackwell systems will last for 4-6 weeks at most. The uncertainty caused by headlines claiming large “design flaws” in Blackwell systems have spooked investors and put pressure on NVIDIA’s stock.
• The bank also believes that customers are simply taking orders of more H200 systems (the prior generation NVIDIA chips) as they wait for Blackwell delays. One concern that has emerged among investors is that Blackwell delays could cause an “air pocket” where NVIDIA temporarily forecasts weaker growth. If H200 orders are accelerating while Blackwell is delayed (and its delay is likely to last no more than 6 weeks), that would reduce the possibility of NVIDIA forecasting performance below Wall Street’s expectations next quarter.
• Most importantly, UBS sees the long-term picture around AI demand in place. They predict NVIDIA’s profit will continue to grow through 2026 (a year when many are concerned spending could begin falling off), and see enterprise demand for AI continuing to grow as a ‘proportion of demand mix.’

Overall, UBS reiterates a “buy” rating and price target of $150 for NVIDIA shares.

Why UBS’ Commentary Matters

Why was this research enough to cause such a strong reaction today?

First, Blackwell is extremely important not just for NVIDIA, but companies like Super Micro and Dell (NYSE: DELL) which will see a huge contribution of revenue from Blackwell systems next year.

Recent estimates from Trendforce point to Blackwell being 80% of NVIDIA’s shipments of GPUs to AI end-markets next year.

Second, the Blackwell delay has added considerable uncertainty around NVIDIA. The company has set an extremely aggressive roadmap for its development of high-end GPU systems across the coming years.

While the aggressiveness NVIDIA is displaying has been celebrated as it extends their lead in the AI space, it also introduces risk.

If trusted Wall Street researchers are confirming Blackwell’s delay should only last about 6 weeks and don’t involve any fundamental flaws with Blackwell chips, that’s going to give investors more certainty that NVIDIA can deliver on its promises for this all-important generation of chips.

Looking forward, NVIDIA’s earnings report on August 28th will likely be its most followed yet. The company will likely give more details on the following:

• The impacts of Blackwell’s delay in terms of timing and revenue.
• More insight into the ROI that customers are seeing from AI chips.
• And the potential for insight into 2025 demand trends.

All of these areas will be closely followed and will not just impact NVIDIA’s share price in the coming months, but the entire sector of AI stocks.

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