Nvidia Rides Fierce Blackwell Demand Toward Stock Record Again

(Bloomberg) -- Nvidia Corp.’s shares are roaring back after the company successfully calmed investor concerns about product delays and its long-term growth prospects.

The stock is up 11% so far this month and is less than 1% below a closing record hit in June. It’s the second-best performer in the S&P 500 Index this year.

Recent strength came after CEO Jensen Huang said Nvidia’s Blackwell chip “is in full production,” and that demand for it “is insane,” comments that came after Blackwell was delayed due to engineering snags, prompting a selloff that has now been erased. In addition, a report last week from Morgan Stanley analysts who met management said that Blackwell orders “are booked out 12 months or so,” with “every indication that business remains robust with very high forward visibility.”

The comments cement the view that Nvidia is still a favored way to invest in artificial intelligence, especially as major companies remain committed to their AI initiatives. Microsoft Corp., for example, is projected to boost capex spending by nearly a third in fiscal 2025 to about $58 billion, according to the average of analyst estimates compiled by Bloomberg.

“There had been questions about the impact production delays could have, so these updates are reassuring,” said Zehrid Osmani, portfolio manager at Martin Currie Investment Management.

Beyond the Blackwell optimism, recent sales from Taiwan Semiconductor Manufacturing Co. showed strong AI demand, while a funding round for OpenAI resulted in a $157 billion valuation. OpenAI recently released an AI model with reasoning capabilities, something Alphabet Inc. is also working on.

These events “have driven a reinvigoration of interest in the space, and people are really getting excited about the use cases for reasoning-based AI,” said John Belton, a portfolio manager at Gabelli Funds. “Reasoning represents a new area for Nvidia, and when you consider how compute-intensive it is, this could be a huge new product category.”

Belton views Nvidia as a core holding and sees AI offering “a steady drumbeat of demand” for years. “It’s not an undiscovered stock, but the valuation is still reasonable if it can deliver the numbers that are expected.”

Analysts expect Nvidia’s revenue to more than double in its current fiscal year, and rise another 44% the following one, according to data compiled by Bloomberg. The Street has continually raised estimates for Nvidia’s earnings and profit over the past quarter.

Nvidia’s strong growth prospects have kept its valuation in check, helping bulls support their case to keep buying. It trades around 37 times estimated earnings, which represents a premium to the Nasdaq 100 Index, but is below its five-year average and under a June peak of more than 44 times.