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Can NVIDIA's rally continue?


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Tematica CIO, Chris Versace, thinks so. He tells IGTV's Angeline Ong why he thinks NVIDIA's parabolic share price trend could continue for some time.

Written by: Angeline Ong | Financial Analyst, Presenter and Content Editor, London
 
Publication date: 

Versace believes this even as the chip giant’s CEO told analysts that there was no way the company can "reasonably" keep up on demand in the short term as the company ramps up production.

(AI Video Summary)

NVIDIA's impressive earnings results

Chris Versace, the Chief Investment Officer (CIO) of Tematica, recently sat down with Angeline Ong to chat about the latest financial results from NVIDIA, a popular technology company. Despite some concerns about meeting high expectations, NVIDIA impressed everyone by delivering impressive results, especially in its data center business. In fact, the company even provided higher guidance than expected, which led to increased expectations for its earnings per share (EPS) and higher price targets.

Potential challenges in meeting short-term demand

Versace believes that NVIDIA could be valued at a whopping $950 per share based on its compound annual growth rate. However, there might be some challenges in meeting the short-term demand as the company ramps up its production. Even though competition might cause prices to decrease, there is still a strong demand for artificial intelligence (AI) from major companies and investors, which will likely continue for several quarters.

Versace explains that AI is currently at a similar stage of development as the internet and the dot-com bubble were in the past. Billions of dollars are being invested in generative AI technology, which has significant long-term potential to disrupt various industries. There is, however, a risk of there being too much supply in the market, which could lower prices.

NVIDIA's impact on higher treasury bond yields and rate cuts

On a different note, the bond market has been affected by NVIDIA's impressive results, resulting in higher treasury bond yields. As a result, investors now expect interest rate cuts to begin no earlier than June. Versace mentions that the timing of these rate cuts will depend on upcoming economic data. Recently, inflation data has been moving in the wrong direction, leading to a more cautious sentiment from the Federal Reserve (Fed). If the economy remains strong and the Fed cuts rates too early, it could worsen inflation. Therefore, Versace believes that the Fed will wait for sustained data aligning with their goals before making any rate cuts.

Looking ahead, Versace points out the key data releases for the following week, such as the final January manufacturing PMIs and the January PCE price index. These reports will provide more insight into the speed of the economy, job creation, and inflation. If the PCE index moves in the wrong direction based on previous data, it could indicate that the Fed will wait even longer to cut rates.

 

 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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