Nvidia Corp. executives will likely need to deliver a surprise at the chipmaker’s annual AI conference that begins Monday to spark a rally in the moribund stock.
The four-day event, called GTC, comes after six months in which the shares have essentially treaded water amid concerns that Nvidia’s rapid revenue growth is peaking. Not even a banner earnings report last month was good enough to impress investors, as the shares fell 5.5% the following day.
“Nvidia is dead money right now, and if earnings couldn’t get it higher, then you’re going to need something really dramatic to change that underlying dynamic,” said Rick Bensignor, chief executive officer of Bensignor Investment Strategies and a former Morgan Stanley strategist. “You won’t get killed for owning it, but because everyone already does, I think it goes sideways until there’s something new about the long-term fundamentals.”
After jumping more than 800% from the end of 2022 through 2024 amid soaring sales of its AI accelerator chips, Nvidia’s rally has slowed dramatically as investors question the durability of the hundreds of billions of dollars being spent on data center equipment.
The stock rose 1.4% last week to $180.25, roughly where it was on Aug. 4. By comparison, the Nasdaq 100 Index is up 5.1% over the same period. Nvidia shares remain 11% below their October closing record. Shares rose as much as 2.5% at the start of trading on Monday.
The biggest focus for investors will be Chief Executive Officer Jensen Huang’s keynote address at 11 a.m. Monday in San Jose, California. That will be followed by an analyst question and answer session Tuesday.
Wall Street isn’t anticipating a big splash from the event. Instead, expectations are for incremental developments, including updates on a long-term revenue forecast related to current and future data center chips. Last year, Nvidia projected those sales would reach about $500 billion by the end of 2026, but in January it indicated that the outlook had gotten rosier.
Nvidia will likely address concerns about AI spending, which could provide “some more confidence around system scalability, networking leadership, and AI capex durability,” UBS analyst Timothy Arcuri wrote in a March 6 note. However, “it is hard to see NVDA being able to provide thesis-altering commentary that creates a breakout for the stock,” he said.
Bloomberg Intelligence analyst Kunjan Sobhani expects “road-map visibility and possible guidance updates,” but wrote that “the only movers of sentiment would be a significant upsizing of the $500 billion pipeline.”
Meanwhile, Bank of America is looking for an updated product pipeline through 2028, and BNP Paribas expects an update on a Groq-based inference chip after Nvidia announced a licensing deal with the startup in December.
Product details and commentary about the AI ecosystem will likely reassure investors about Nvidia’s dominant market position, but they may not alleviate concerns about the outlook for revenue expansion.
While Nvidia’s latest results were impressive, the 73% rise in fourth-quarter revenue doesn’t look sustainable, especially if the companies aggressively building out AI infrastructure pull back on their spending, said Lisa Shalett, chief investment officer of Morgan Stanley’s wealth management arm.
“We need to know how far above the normal current earnings are, because that will tell you what kind of premium they deserve to trade at,” Shalett said.
At 21 times estimated earnings, Nvidia is trading at a significant discount to its average over the past decade of about 35. It’s now the cheapest of the five most valuable companies in the S&P 500, including Apple Inc., Alphabet Inc., Microsoft Corp. and Amazon.com Inc.
Despite the stock’s lack of momentum, Wall Street remains overwhelmingly bullish. Nvidia has 75 buy ratings, four holds and only one sell, according to data compiled by Bloomberg. Based on the average price target, analysts see upside of roughly 49% over the next 12 months from Friday’s closing price.
Still, even Nvidia fans are prepared for the stock’s sluggishness to persist.
“The event could be directionally bullish, but Nvidia is so large and closely tracked that it is hard to imagine what kind of thesis-breaking news could come as a surprise,” said Clayton Allison, portfolio manager at Prime Capital Financial, which has about $40 billion in assets.
“I feel good about holding Nvidia and think the stock will eventually catch up to its fundamentals,” he added. “However, I don’t think GTC will be the catalyst. They’d have to come out with some kind of surprise mystery chip for the market to really reward them.”
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