After a significant selloff on Friday, Nvidia Corp NVDA and Advanced Micro Devices, Inc AMD stocks experienced a partial rebound on Monday. On Friday, Nvidia had its worst day since March 2020, losing over $200 billion in market capitalization. Stocks like AMD, which had previously gained from the AI boom, also lost around 6% of their value.
Investor concerns stemmed from the U.S. Federal Reserve’s decision to raise interest rates and retaliatory strikes between Iran and Israel, as reported by the Financial Times. Nvidia’s stock price decline contributed to a 0.9% drop in the S&P 500 index on Wall Street.
Oppenheimer analyst Rick Schafer highlighted that few companies are expected to significantly increase their earnings estimates during the current earnings season due to global macroeconomic factors and sluggish demand outside of the AI sector. However, companies such as Taiwan Semiconductor Manufacturing Co TSM and ASML Holding NV ASML have recently reported robust demand for AI-related manufacturing capacity and equipment.
Schafer anticipates continued strong capital expenditures from cloud service providers, potentially reaching the higher end of forecasts. His recent checks in Asia indicate an accelerated server growth rate of over 40% for the year. Major cloud service providers (CSPs) such as Google Cloud, Microsoft Azure, and Amazon Web Services (AWS) are driving this demand.
Nvidia and AMD’s GPU-powered solutions are widely available through these major CSPs. According to the analyst, Chip-on-Wafer-on-Substrate (CoWoS) capacity will likely remain constrained through 2024, although lead times for Nvidia’s H100 and H200 GPUs have decreased to about half of their 2023 peak of 40-50 weeks.
PC and handset channel inventory levels are currently low, with growth tempered by modest demand. Schafer predicts that industrial sectors will likely experience a downturn in the second quarter, but the trajectory of the second-half recovery remains uncertain.
Finally, the analyst expects auto sales to decline in 2024 due to slowing EV adoption and excess inventory. Nvidia remains Schafer’s top pick, as he projects strong demand for AI applications in data centers. He estimates that Nvidia will sell approximately 3.2 million flagship GPUs this year, with the potential to reach 4 million units as supply constraints ease.
Schafer also highlights Nvidia’s upcoming B100 launches in the third quarter, with server ramp-up beginning in the fourth quarter. AMD’s MI300 is expected to sell around 400,000 units this year. The analyst emphasizes Nvidia’s dominance in the accelerator market.
In premarket trading on Monday, NVDA shares gained 2.85% to $783.72, while AMD shares rose 0.44% to $147.29.
