TLDR:
- Nvidia stock climbed 1.2% in premarket trading following positive AI signals from Alphabet and Intel earnings
- Alphabet maintained its $75 billion capital expenditure outlook and cited “strong relationship” with Nvidia
- Intel’s AI chip competition remains distant, with no timeline for competitive AI processor release
- Nvidia shares are currently down about 30% from previous highs, similar to eight other historical pullbacks
- Nine recent analyst ratings show overwhelming buy recommendations with average price targets 58% above current levels
Nvidia shares climbed early Friday as investors processed earnings reports from Google-parent Alphabet and chip rival Intel. The stock rose 1.2% in premarket trading to $107.70, building on Thursday’s 3.6% gain. This movement comes as the AI chip leader continues to dominate the market despite recent share price volatility.
Alphabet’s earnings offered reassuring signals for Nvidia investors. Google’s parent company maintained its capital expenditure outlook at $75 billion for the year, indicating sustained investment in AI infrastructure.
Alphabet executives specifically mentioned their “strong relationship” with Nvidia. They also noted finishing the quarter with more demand for cloud-computing services than they had capacity to serve.
This demand dynamic bodes well for Nvidia as the premier supplier of AI chips. Even as Alphabet works to improve its own in-house AI chips, the company’s continued reliance on Nvidia hardware suggests a solid ongoing partnership.
Competition Remains Distant
Meanwhile, Intel’s earnings call revealed limited near-term competitive threats to Nvidia’s AI chip dominance. New Intel CEO Lip-Bu Tan spoke about building “full stack AI solutions” similar to Nvidia’s offerings.
However, Tan provided no timeline for when Intel might bring a competitive AI processor to market. This lack of clarity suggests Nvidia’s leadership position remains secure for now.
Intel’s AI roadmap has faced setbacks. In January, the company announced it wouldn’t bring its next AI data center product Falcon Shores to market.
Instead, Intel shifted focus to developing another product called Jaguar Shores. “We still have a Jaguar Shores product on our road map,” said Michelle Johnston Holthaus, CEO of Intel’s Product business.
Holthaus acknowledged Intel’s current absence from the AI chip segment. “We know that is a segment of the data center market that we’re not competing in today, and we need a robust portfolio as all the customers are looking for alternatives,” she said during Thursday’s analyst call.
Wall Street’s Bullish Outlook
Despite Nvidia’s recent pullback of approximately 30% from previous highs, Wall Street analysts remain overwhelmingly positive on the stock. This price drop mirrors eight similar declines since Nvidia’s 1999 IPO.
Of nine analysts issuing ratings in late April, eight recommend buying Nvidia stock. Raymond James even classified it as a “strong buy.”
The lone non-buy rating came from D.A. Davidson, which maintained a “neutral” recommendation. Even this more cautious outlook included a price target suggesting 15% upside potential.
According to Yahoo! Finance, which scores analysts based on accuracy, all of their top 10 rated analysts recommend buying Nvidia stock. This represents unusual consensus among top performers.
The average 12-month price target sits 58% above the current share price. Some analysts project even higher gains, with Cantor Fitzgerald and Rosenblatt both recently setting $200 price targets.
These bullish targets would represent gains of roughly 92% from current levels. Analysts cite several factors behind their optimism, including Nvidia’s growth prospects and product roadmap.
Raymond James analyst Srini Pajjuri noted that Nvidia’s forward price-to-earnings multiple of 27x already accounts for risks related to exporting H20 GPUs to China. He highlighted increasing shipments of the company’s Blackwell GB200 chip.
Pajjuri also mentioned the new GB300 chips on track to begin shipping in Nvidia’s fiscal third quarter. These product developments “should help sustain momentum through the year,” according to his client note.
Some market observers raised concerns about Amazon potentially pausing new data center space leasing. However, Kevin Miller, vice president of global data centers for Amazon Web Services, directly addressed these rumors in a LinkedIn post, suggesting the concerns may be overblown.
Former Intel CEO Pat Gelsinger recently commented on Nvidia’s competitive position. In an interview with Yahoo! Finance, he stated it would be very difficult for any rival to challenge Nvidia’s leadership.
Gelsinger referenced a “10x rule,” explaining: “I’ve always viewed that there’s sort of this 10x rule, where if you’re not 10x better than the king, you’re not going to displace that.” He noted no competitor currently offers chips approaching this performance threshold compared to Nvidia’s top GPUs.
The historical pattern of Nvidia’s stock recoveries following steep pullbacks adds context to current analyst enthusiasm. In past instances of 30% or greater declines, Nvidia has eventually rebounded strongly.
This pattern of recovery, combined with ongoing AI infrastructure demand and limited near-term competition, appears to be driving Wall Street’s current buy recommendations for the chip maker.
