Today Is All About Nvidia
The tech star will join the Dow Jones club, but let's also look at data center and AI capacity constraints as well as accelerating shipments.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
We are kicking off a week that could either be volatile or play into the seasonal strength of the market, powering it higher. And we've got a packed five days: The presidential election, the Fed’s policy meeting, earnings, and the October Service PMI data. So far, we’ve positioned ourselves well for the coming quarters, have ample cash on hand to take advantage of opportunities just like we did in early August and last week. But one item has our focus today: Nvidia NVDA.
Dow Jones Club
Nvidia -- after a late Friday decision -- will replace Intel INTC in the Dow Jones Industrial Average. Given Intel's recent history, this is no surprise. Remember, this time last year Walgreens Boots WBA was ousted from the Dow and replaced by Amazon AMZN. Let’s also remember that NVDA shares have been part of the S&P 500 and the Nasdaq Composite for some time now.
Compared to the SPDR S&P 500 ETF SPY, which has nearly $500 billion in assets under management (AUM), the SPDR Dow Jones Industrial Average ETF Trust DIA has a far smaller footprint with $35.2 billion in AUM. The S&P 500 also has a plethora of other ETFs that track it than SPY. So, while Nvidia’s being added to the Dow Jones Industrial Average is welcome and could add some incremental demand for the shares, we should not expect it to have a substantial impact.
Nvidia Pushes SK Hynix
Nvidia CEO Jensen Huang has reportedly asked memory chip maker SK Hynix to accelerate delivery times for high-bandwidth memory (HBM) chips called HBM4 forward by six months. Microsoft’s MSFT cloud guidance last week called for somewhat slower revenue growth because demand is outstripping capacity and OpenAI said that it too is being restrained by a lack of computing capacity. Odds are those are not the only two, which also explains the capital spending comments from Meta META, Alphabet GOOGL, and Amazon.
Those comments about the demand for data center and AI chips keep us bullish not only on NVDA shares but also Marvell MRVL. With Marvell, it’s because of what it says about its data center/AI business and the proprietary AI chips it is working on with many of those Big Tech companies. It’s also because ramping AI adoption and usage should translate into greater demand for its carrier infrastructure and enterprise networking businesses.
Nvidia-Marvell Watch List
We will also be closely watching for data center/AI comments from Lumentum LITE when it reports on Nov. 7. We’ll also be on the lookout for Taiwan Semi’s TSM October revenue report which could come sometime this week.
The Pro Portfolio is long AMZN, NVDA, MRVL, META, MSFT.
