The Stock of Nvidia Continues to Gain, and an Analyst Warns Not to Fight the Ai Train

The continued surge in a select few artificial-intelligence semiconductor stocks has sparked debates among technology investors about whether this trend signifies market "craziness."

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Mizuho analyst Jordan Klein notes considerable investor confusion about the forces driving the rapid rise of these hot chip stocks. Despite the confusion, Klein suggests that the surge appears to be driven more by retail investors, quant funds, and passive investments rotating into tech winners to capitalize on momentum and avoid missing out on what some see as the biggest market event since the dot-com boom 25 years ago: the rush of spending on AI investments.

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Klein observes that the momentum behind AI investments shows no signs of slowing down. For investors, this means that even though the tech market may seem "crazy," he advises against exiting these winning stocks hastily. This includes shares of Nvidia Corp., Broadcom Inc., and Micron Technology Inc.

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Nvidia shares rose 1.7% on Thursday morning, solidifying its position as the most valuable U.S. company. Broadcom shares dipped 2%, yet they have surged nearly 60% this year and 24% in the past month. Micron shares also fell by 2% on Thursday but have rallied 75% year-to-date.

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Vivek Arya of BofA expressed a bullish stance on Nvidia's stock, acknowledging that its steep climb makes it susceptible to profit-taking. However, he believes any volatility will likely be short-lived. Arya remains optimistic due to the early stages of hardware deployment for generative AI, projecting that this deployment cycle could extend for another three to five years. Currently, the market is only in the second year of this cycle.

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Arya is particularly enthusiastic about Nvidia’s upcoming Blackwell lineup, expected to start shipping later in 2024, and its strong demand among cloud customers. Additionally, he highlights Nvidia's burgeoning opportunities in sovereign AI, where countries are investing in building their own AI infrastructures.

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Arya contrasts the current AI investment boom with the dot-com boom, noting that unlike the risky debt-fueled dot-com era, the generative AI deployment is driven by well-funded cloud customers engaged in a critical race to advance AI capabilities. He continues to rate Nvidia shares as a buy and considers them a top pick.

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In summary, while the surge in AI semiconductor stocks might seem reminiscent of past market bubbles, analysts suggest that strategic and well-funded investments underpin this trend. Investors are advised to stay the course with leading tech stocks like Nvidia, Broadcom, and Micron, given their potential for continued growth amidst the evolving AI landscape.

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