Kiplinger | Nvidia weakness creates a “lower bar” for the chip stock to overcome, says Main Street Research CIO
Nvidia stock is poised for a lower open Tuesday, with shares down 0.9% at last check. NVDA has pulled back in recent weeks amid broader risk-off trading on Wall Street and concerns that the AI trade has run too far, too fast.
But James Demmert, chief investment officer at Main Street Research, says this “brief reset … means the stock now has a slightly lower bar to clear post-earnings.” Demmert expects “Nvidia to exceed estimates and provide future earnings and revenue guidance that is higher than investors expect.”
He adds that it is “unlikely that Nvidia has seen any slowdown in demand for its products, even with increased competition, given how early we are in the AI cycle.”
As for concerns over a potential AI bubble, the CIO reminds us that “all technology revolutions create bubble-like stock price performance,” and excitement over all things artificial intelligence is currently expanding at a healthy pace.
While valuations are indeed lofty, Demmert says they’re still trading at a discount to earnings growth rates, while sentiment has not yet reached the euphoric stage that signals a market top.
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