Semiconductor star Nvidia (NASDAQ: NVDA) rocketed higher Thursday morning, rising nearly 5% before retreating to a gain of about 3% as of 11:11 a.m. ET. According to CNBC, there’s no big mystery as to why. Citing comments from the network itself Final bell: Overtime During the broadcast, CNBC quoted CEO Jensen Huang as saying that demand for Nvidia’s new Blackwell chip for artificial intelligence (AI) functions is becoming “insane.”
Oh, and Blackwell is still on track to go on sale in the fourth quarter, just a few months away.
The good news has a (good) domino effect on Nvidia’s contract chip manufacturer, Taiwanese semiconductor manufacturing (NYSE: TSM)which is an increase of 2%. However, it has a less beneficial effect on the Nvidia rival Intel (NASDAQ: INTC). That Shares are still down 0.9% after facing a 3.3% loss earlier in the day.
Catalysts are plentiful
Commenting on how Blackwell could boost Nvidia yesterday, investment bank JP Morgan predicted that this new chip will add “several billions” of dollars to Nvidia’s fourth-quarter revenue, as TheFly.com reports. These sales should also increase as production increases, which would also generate additional billions for Nvidia and TSMC.
But that’s not the only catalyst at work today. Yesterday, OpenAI announced that it had just raised $6.6 billion in new funding “to accelerate the progress of its AI software.” OpenAI specifically stated that some of this money would go toward “raising.”[ing] computing capacity” (i.e., buying AI chips, most likely from Nvidia, and leaving TSMC to do the grunt work).
On top of the additional revenue these two companies can expect from OpenAI’s chip purchases, Nvidia will also benefit from the growing valuation of OpenAI itself, in which it invests. According to the latest report, this latest round of funding has increased OpenAI’s private market value to $157 billion.
Are Nvidia Stocks a Buy?
What does this mean for Nvidia stock? Well, Nvidia reports its next earnings on November 19, and the outlook is good. Analysts polled by S&P Global Market Intelligence predict earnings will rise more than 75% to $0.65 per share under generally accepted accounting principles (GAAP). Revenue should rise 82% to $32.9 billion.
What investors will really be looking at, though – especially in light of these comments from JP Morgan and Huang himself – is what kind of forecast Nvidia gives in its Q3 report for the future. Q4. Right now, analysts think earnings growth will slow to just 43%, but if Blackwell’s revenue pushes growth past that number, things could look very bright for Nvidia stock going forward.
Is TSMC stock a buy? And what about Intel?
What’s good news for Nvidia will probably also be good news for Taiwan Semiconductor. And because TSMC shares sell at a much lower valuation than Nvidia (31 times trailing earnings versus 56 times), TSMC could be a smarter bet on Nvidia’s “insane” growth. It also doesn’t hurt that TSMC produces chips for a lot of semiconductor companies not named Nvidia (including Intel). So if for some reason Blackwell is delayed or growth doesn’t go as planned, the effect on TSMC’s earnings will be diluted.
In this respect, diversification can be a virtue.
All this said, I see much less reason to be bullish on Intel. At 93 times earnings, it is the most expensive chip stock of the three and appears to be steadily losing ground to its arch-rival Nvidia. Blackwell’s untimely arrival in Q4 could only make things worse for Intel, I fear.
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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends JPMorgan Chase, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: Short November 2024 $24 Calls on Intel. The Motley Fool has a disclosure policy.
Why Nvidia and TSMC Stock Just Popped, but Intel Fell Today was originally published by The Motley Fool
