Yahoo Finance Executive Editor Brian Sozzi breaks down Nvidia shares hitting an all-time high as investors eye the recent AI boom and growing semiconductor demand.
JULIE HYMAN: All right. Let's get to our Morning Brief. Now, shares of NVIDIA, of course, had a huge gain yesterday. They hit an all-time high today. They are little changed. The chip maker added nearly $184 billion to its market cap in yesterday's session alone. Now that total is 938 billion. It was the third largest market cap gain ever for a stock. But were these big moves a sign of a stock price bubble? Executive editor Brian Sozzi is joining us now. That's what he wrote about this morning.
BRIAN SOZZI: Yeah. Well, I hope this doesn't represent like the market topping Nvidia. Now suddenly we look a year back and Nvidia is 50% lower. But look, we have seen-- any time you see a stock price gain more than almost $200 billion in terms of a market cap in a single session, that is just absolutely ginormous.
JULIE HYMAN: It's insane.
BRIAN SOZZI: It is insane. So you get to thinking, is this like the cannabis stock bubble of 2021, early 2022? Is this the--
DIANE KING HALL: Is this the top?
BRIAN SOZZI: Is this the top? Is it a tool of bubble mania? And what I mentioned in the brief, it's not.
DIANE KING HALL: Will it bubble?
BRIAN SOZZI: This is something-- right. This is something that you and me talked about, Julie, in the newsroom this morning-- the other morning. Nvidia is making tangible stuff. They're making chips. You can see and touch their stuff. And they're making things in grand fashion that is getting used by the likes of Meta, many other companies to stand up their artificial intelligence initiative. So that is good stuff. There is strong demand for what they're doing. So that's first. Second of all, you look at CEO Jensen Huang-- and, Julie, you and Dan Howley our tech guy have gotten to know Jensen through a minute of series of interviews through the years.
I like that he has stayed measured throughout these past few years. He continues to execute very strongly. How do I know? The past six years, Nvidia video has hauled in over $40 billion in operating profits. To me, that's a sign of a leadership team staying focused, despite all the frenzy and the market that's going around them. They're executing at a very high level. Profitable company doing tangible stuff. And ultimately, they're on the leading edge of technology that's going to help companies do more stuff over the next decade.
DIANE KING HALL: And I mean, they were in ChatGPT before we even knew they were involved with ChatGPT. And, you know, the people that we talk to tend to say that, like, they're-- in terms of leadership, they're so far out. Second place is, you know, a distant second place, like say AMD.
BRIAN SOZZI: What bothers me-- let's keep in mind, AMD earnings call about three weeks ago, let's say. They went on there and they told the street that we are just now setting up our generative AI team.
DIANE KING HALL: Right.
BRIAN SOZZI: From an investor standpoint--
DIANE KING HALL: They're behind.
BRIAN SOZZI: Wildly two opposing different stories here. You have an Nvidia already at the leading edge, gaining business from Microsoft or ChatGPT, which is backed by them. And now they're winning large amounts of business, while AMD is still trying to play catch up. That's not good.
JULIE HYMAN: At the same time, there probably is a bigger investable thesis here. And I was struck by a note out from Citigroup strategists today. First of all, they upgraded overall US stocks to neutral. But they upgraded tech shares to overweight because of AI. And they don't talk about Nvidia specifically because they're strategists, macro strategists, they're looking at the bigger picture. But the quote from-- that was cited from this really stuck out to me. "We would expect that it is too early to fade the moves before AI has even developed far enough to be able to disappoint expectations." I thought that was so interesting. It is such early days here.
Now, maybe it's true. Nvidia, specifically, that it could disappoint expectations. But when we talk to people on the show about this, even people who are steeped in AI, they don't know what's going to happen, right? It's-- there is this hope, and there's our imagination, and there are some concrete things that the likes of NVIDIA and their clients are doing. But really we don't fully understand what the capacity or not of this is going to be.
BRIAN SOZZI: And the street doesn't understand. Look at that guidance that Nvidia came out with. The street was at $7.2 billion. They came out $11 billion.
JULIE HYMAN: Right.
BRIAN SOZZI: I have not seen that type of just disparity in terms of guidance in many, many, many years. It tells me very strong demand. But the other way to read this, and I think this is what Citi is trying to say, for all these generative AI chips that Nvidia is selling, look at Meta, they're using those chips to stand up their own AI initiatives. What does that mean? Maybe fewer workers and bigger profits. I think that's part of the play here for Citigroup.
DIANE KING HALL: But I also wonder if they were trying to throw water on the potential for another kind of dot com bubble, you know, where we went through that before. But I don't think that's Nvidia's problem--
BRIAN SOZZI: This isn't normal. This is not normal. I want to be very clear. This is not normal to see a company gain over-- almost $200 billion in market cap in a single session. An investor, you know, I encourage you, go to Yahoo Finance, go to our stats page on NVIDIA, and you will see this stock trading at record level valuations. What does that mean? Every single quarter now for NVIDIA for the next 5 to 10 years has to be extremely strong, it has to show accelerating growth rates in sales and profit. And if they don't, the stock's coming back down.
JULIE HYMAN: Just one footnote to all of this. There is one big investor that did not benefit who has been a long, long, long time booster, Cathie Wood.
DIANE KING HALL: Yes.
JULIE HYMAN: Her flagship Ark benchmark fund got out of NVIDIA back in January. She holds it in some of her other funds. She has been a big supporter of the stock for years, and years, and years. So it's interesting that she stepped out. She had made some comments about its valuation, so--
BRIAN SOZZI: I don't get this call. Cathie, I very much appreciate what she does. But if you were betting on the future of everything in tech, how do you not stay long in Nvidia? Nvidia is driving these things in many respects.
JULIE HYMAN: Maybe she'll wait for a drop and get back in.
BRIAN SOZZI: Maybe she will.
JULIE HYMAN: I don't know.
DIANE KING HALL: We'll see.