Source: Wind
Recently, seven US technology stocks have surged and plummeted one after another. Tesla and Meta have experienced sharp fluctuations. Nvidia, which had a large decline in the early stages, has now also entered a critical period: whether to stop falling and recover or continue to fall.
The controversy is getting more intense
Nvidia has had the biggest pullback of 22.38% since its recent peak, and the company is expected to disclose its latest earnings report on January 22nd.
As technology stocks fell into turmoil, there was more controversy in the market about the AI bubble. Some analysts believe that the market may just be misinterpreted; Nvidia's demand is still strong, and AI demand cannot be eliminated overnight.
Another view is that after experiencing the peak of capital expenditure in the past two years, if downstream companies are still unable to find a sustainable source of revenue, it is foreseeable that some small and medium-sized enterprises will withdraw from the AI model competition; as a result, Nvidia's profit is already at its peak.
What are you optimistic about
Investors who are optimistic about Nvidia's future are: Nvidia's position in the AI field, and that AI still has huge room for future growth.
For example, Guojin Securities believes that AI model training or AI platform construction has evolved into a systematic project integrating software, hardware, and communication, and Nvidia has always maintained a leading edge over its competitors in all aspects. On the software side, CUDA supports the company's full range of GPUs, and is relatively leading in software library coverage and AI framework support. On the hardware side, the company's training chips are relatively ahead of competitors in terms of computing power and other indicators. On the communication side, the company developed an NVLink system for interconnecting cards and an IB network architecture for cluster networks to ensure maximum training and inference efficiency.
In the field of demand, overseas cloud vendor CAPEX is expected to return to the upward cycle in 2024 and is structurally skewed towards AI and corresponding infrastructure, which is expected to continue to drive demand for AI chips. According to Factset's unanimous expectation from Zhongji's 23rd annual report, the capital expenditure of overseas cloud giants (Microsoft, Amazon, Apple, Meta, Google) will increase 27.2% year-on-year to US$193.83 billion in 2024.
What are you worried about
Investors who are bearish on Nvidia simply express their opinions on the two dimensions of growth, valuation, and room for subsequent growth, and come to the conclusion that Nvidia will continue to decline.
Some agencies have pointed out that according to the 2024 fiscal year adjusted earnings per share of $12.96 (up 288% year over year) and the 1-year price-earnings ratio average valuation is 38.15 times. Obviously, compared with fair value estimates, Nvidia's transaction price still has a significant premium of +54%. Despite recent adjustments, the fair value is still $494.40. By implication, Nvidia still needs to pull back more than 38%.
In terms of market share analysis, this is another reason to be bearish: in December 2023, Nvidia already occupied 92% of the generative AI chip market; as AI chips from Intel, AMD and other companies continue to mature, market trends suggest that Nvidia's market share will continue to decline.
edit/lambor