Nvidia, the chip maker, experienced fluctuations early on Tuesday, but its prospects appear promising amid another surge in investment in artificial intelligence (AI).
In early trading, Nvidia shares were down 0.8% at $942.21, following a previous day’s close of 0.8% higher at $950.02. The introduction of Nvidia’s new Blackwell chips at its recent developer event has sparked speculation about the potential spending by major U.S. customers on the next generation of hardware for AI system training.
Analysts at CFRA estimate that tech giants such as Amazon.com, Google, Meta Platforms, and Microsoft are poised to increase capital expenditures by over $175 billion this year, indicating growth of more than 25% from the previous year. While this spending is expected to continue into 2025, the growth rate is anticipated to taper to a low-teens percentage, coinciding with the expected release of significant volumes of Blackwell chips.
According to CFRA analyst Angelo Zino, Nvidia’s revenue is unlikely to decelerate anytime soon, particularly with projected increases in data center spending in 2024 and beyond, driven by the Blackwell Platform.
Zino maintains a Buy rating on Nvidia’s shares, reflecting confidence in the company’s future performance.
Meanwhile, Nvidia’s suppliers, such as SK Hynix, are also showing signs of optimism regarding demand. SK Hynix plans to invest approximately $4 billion in constructing an advanced chip-packaging facility in Indiana, crucial for producing high-bandwidth memory chips essential for advanced AI accelerators.
Although SK Hynix has not yet confirmed its investment plans, its shares surged 4.3% in South Korea following the news.
In contrast, other chip makers like Advanced Micro Devices and Intel experienced slight declines in early trading. Both stocks had previously fallen amid reports suggesting that their chips were being targeted for removal from Chinese government devices.
Despite market fluctuations, Nvidia’s shares have soared by 92% year-to-date, outperforming major indices such as the S&P 500 and Nasdaq Composite Index, which rose by 9.4% and 9.2%, respectively, over the same period.