VIDEO: Nvidia Brings Positives for Our AI Plays

In today’s Daily Rundown video, Chris Versace discusses the Portfolio’s new price target for Nvidia NVDA and where members should be buying the shares. 

Versace also connects Nvidia’s data center results and guidance with Salesforce’s CRM robust July quarter AI dealmaking, and AI on PC comments from HP HPQ and Best Buy BBY to set the stage for Marvell’s MRVL earnings after Thursday's market close.

"It all looks to be very promising with Nvidia for us," he said. "All in all, today was I would say very positive for the AI story... I think this is going to set up a very good second half of the year."

He added that the August revenue report from Taiwan Semiconductor and additional comments about AI adoption in the enterprise sector as upcoming catalysts on his radar.

Transcript

CHRIS VERSACE: Hey, everyone. Chris Versace here, Thursday, August 29th, almost to the end of one of the slowest volume weeks of the year. But stocks today are moving nicely now that we've put the spotlight earnings report that was NVIDIA kind of a little bit in the rear-view mirror. If you saw our alert on NVIDIA, you know that we raised our price target to $155 from $148. We reiterated our one rating.

And all in all, it was a very solid earnings report. The company bested expectations for the July quarter. They boosted expectations for revenue for the current quarter. And as we walked through in the alert, yes, there is going to be a little bit of incremental margin pressure as the company starts to ramp production for Blackwell, but nothing unexpected that was already baked into the Wall Street forecasts and earnings models. So no real surprises there.

If anything, the higher than expected revenue, as I wrote, and the margins that are pretty much in line with what folks were looking for tells us that we are going to see some incrementally higher profit dollars out of NVIDIA. That is leading us to boost our price target. But also, we're seeing that from a number of other folks as well. What was the key driver? Obviously, it was Data Center. It's 88% of the business. It was up 150-plus percent year over year.

Are we surprised by this? We should not be. We've paid attention closely to what big tech and their spending is on. AI and data center, we know it's going to get stronger in the second half of the year. We know it's going to be even stronger in 2025. We shared one of those 10-Q notes from Meta that said just that with you yesterday. And, of course, we know that Amazon and Microsoft and others are also ramping their AI/data center

So it all looks to be very promising. With NVIDIA, for us, it's going to be the adoption of Blackwell, the new next generation chip-set. But it's also going to be the ramp for that production and it maturing that should drive some nice margin improvement in the coming quarters. So the next one, two quarters, three quarters, ramp. And as we move past that, they'll start to be able to recognize manufacturing synergies and get the margins back to where they were in the first half of this year.

So that's all very positive for NVIDIA. Because we raised our price target to $155, the shares are around $119, $120, more than enough upside to justify our one rating and a good place for folks to pick up shares if you're light. But I did share in the alert that, remember, September tends to be a very challenging month for the market. If history repeats itself, that could bring the opportunity to pick up NVIDIA at somewhat lower share prices than they are today.

If that were to happen, that would be a wonderful thing. Let's just connect the dots. Obviously what NVIDIA had to say about data center, AI, and related demand and the outlook, all very good for Marvell, another one rated stock that we have in the portfolio. And that company, Marvell, will report after today's close. So, again, NVIDIA's comments really set the stage for that. But it wasn't the only positive comment that we heard.

Last night, Salesforce reported as well. And in those comments, they talked about signing a massive number of AI product deals. I believe the number was around 1,500 deals in the quarter alone, simply huge. They also commented that their bookings were about double, quarter over quarter. So this tells us that the enterprise is embracing AI. If you remember, several weeks ago, there was a lot of concern about that.

This is a data point that helps put that to rest. It builds on what ServiceNow had to say when they reported. And I would say, too, that Salesforce's comments support what we heard from-- not only heard from ServiceNow, but it also supports the adoption of AI, which is driving incremental prices at Salesforce. That's also another positive.

But let's put those two together. And what it says is, the enterprise is adopting AI. This fits with our thesis for Marvell's non-data center business, the enterprise networking and carrier infrastructure because, as the enterprise adopts AI, we start to think about the explosion in data creation and consumption that can congest networks. So that's a positive for that side of Marvel's business. And as I wrote in the alert this morning, I would be disappointed in Marvell if they did not signal that they see better days ahead for their networking and carrier infrastructure business. And by better days ahead, I mean the coming quarters.

Adding to that thought, we also had some comments about AI on PC. And, remember, the thinking there is that, as more of these devices get into the wild, so to speak, their use will also contribute to this explosion in data consumption, data creation, that will help pressure networks. The same thing is going to be true with AI on smartphones. But with AI on PC, we had very reaffirming comments from HP last night and from Best Buy this morning.

Specifically, with HP, it says that AI PC shipments are ramping. And the initial reaction is very positive. HP's comments also talked about how the PC rebound is also accelerating. In fact, they said that their personal system units were up about 14% sequentially. That's not all going to be AI on PC, mind you. But that is a positive indicator that that market is turning.

And we think that, as we get more AI-capable PCs into the marketplace from HP, from Dell, from others, that's going to be very well for uptake, good for Marvell, but, of course, also going to be good for Qualcomm, given their relationship with Microsoft as it relates to AI PCs. And, yes, HP called out a particular model that they have as the fastest, the thinnest, a simply wonderful AI on PC laptop. And, yes, it has the Qualcomm chip-set in it.

HP went on to say that they do see AI on PCs being around 10% of total sales in the second half of the year for PCs. That's in line with expectations. But they also said that they see that continuing to ramp over the next few years as more models become available, again, no real surprise. We've shared those numbers with you. And then, just finally, with Best Buy, that adds another layer of confirmation.

They said that, even though their domestic comp sales for the July quarter fell 2.3%, there was strength in tablets and computing. And on the earnings call, the management team specifically called out the strength in laptops. So, again, some of that is going to be related to overall rebound in demand. But some of that is also going to reflect the initial uptake of AI on PCs, which we see positive for both Marvell and for Qualcomm.

So we'll be making some other comments later today. But all in all, today was, I would say, very positive for the AI story. When we look at NVIDIA, clearly tracking, when we look at Salesforce and HP, AI in the enterprise, AI on-device, tracking relative to expectations as well. I think this is going to set up a very good second half of the year. I think we're well positioned with our stakes in NVIDIA, Marvell, Qualcomm.

We'll also see Apple benefit. And, of course, we have a nice, healthy position in Apple as well. Next catalyst for all of this that we're going to be paying attention to, they will be the-- sorry, not the September. In the September, we'll get the August revenue report from Taiwan Semiconductor. And we'll also be looking for other comments about AI adoption in the enterprise during the upcoming September Investor Conference series.

So, with that, I would say, be sure to check your emails, check your alerts. We're going to have some other comments coming to you today, but also tomorrow and ahead of the holiday weekend. And, of course, if we make any moves with the portfolio, we want you right there with us. Thank you so much for watching. We'll see you soon.

At the time of publication, TheStreet Pro Portfolio was long NVDA and MRVL.