Nvidia Corp. ended last year with its first record-high closing stock price since November, fueling investor anticipation for CEO Jensen Huang’s speech at the CES trade show in Las Vegas. While Nvidia traditionally uses CES to unveil consumer devices, the focus this year is on the Blackwell chip, widely considered the company’s next major growth catalyst.
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Jensen Huang, CEO of Nvidia, speaks during the company's GTC conference.
Blackwell Chip: Navigating Demand and Supply Challenges
Despite strong demand, Blackwell’s rollout has been hampered by supply constraints stemming from manufacturing complexities. Portfolio manager Matt Cioppa of Franklin Templeton Equity Group affirms the widespread belief in robust Blackwell demand, suggesting it could refocus the market on Nvidia’s long-term potential. This sentiment echoes Huang’s previous statements, including his October declaration of “insane” demand and November confirmation of ongoing shipments amid “very strong” demand.
Nvidia’s Stock Performance: A Rollercoaster Ride
Nvidia’s stock soared 171% in 2024, significantly contributing to the S&P 500’s overall gains. The stock has continued its upward trajectory in the new year, rising 11% and nearing Apple Inc.’s market capitalization of $3.7 trillion. However, the company’s November earnings report triggered a brief stock slump as revenue forecasts fell short of Wall Street’s increasingly high expectations.
The Rise of AI Competition and Market Share Dynamics
The recent surge in AI spending has benefited other semiconductor companies. Broadcom Inc. and Marvell Technology Inc. have seen their stocks rally on projections of booming AI component demand and strong earnings driven by custom AI chips. Morgan Stanley analysts equate these rallies to a wealth transfer from Nvidia, although they maintain their positive outlook on the company, anticipating market share gains and viewing Huang’s keynote as a “positive event.” They expect the core message to reiterate exceptional Blackwell demand constrained by supply limitations, with Blackwell driving revenue growth in the second half of the year.
High Stakes and Valuation Concerns
Mizuho Securities tech specialist Jordan Klein positions the CES event and Huang’s speech as crucial tests of tech sentiment and risk appetite. A negative or stagnant stock response could signal broader market concerns. With the tech earnings season still weeks away, investors lack immediate data points to assess fundamentals.
Nvidia’s remarkable stock performance has raised valuation concerns. Trading at 19 times estimated revenue and nearly 35 times estimated earnings, it stands out as one of the most expensive Nasdaq 100 components. While maintaining a positive stance on Nvidia and other large tech stocks, Emily Roland, co-chief investment strategist at John Hancock Investments, anticipates market volatility and emphasizes the need for future performance to justify the current valuation. “At some point there is going to be a ‘show me’ moment in 2025 that is going to have to reaffirm the story,” she cautions.
Conclusion: Blackwell’s Potential and Market Uncertainties
Huang’s CES presentation holds significant weight for Nvidia’s future. While Blackwell’s potential is undeniable, the company faces challenges in navigating supply constraints and maintaining its dominant position amid rising competition. The market’s reaction to Huang’s address will be a key indicator of investor confidence in Nvidia’s ability to deliver on its promise and justify its premium valuation. The coming year will be crucial in determining whether Nvidia can continue its remarkable growth trajectory or if a market correction is on the horizon.
