Nvidia Stock Gains. What the Chip Maker Needs to Hear From Big Tech Earnings. -- Barrons.com

By Adam Clark

Nvidia was rising early on Monday as it looks to bounce back from a steep fall last week. The chip maker's AI-driven rally is set to be tested by earnings from major technology companies over the next few days.

Nvidia shares were up 1.6% at $773.92 in premarket trading. The stock closed down 10% at $726 on Friday.

So far, earnings season has been bruising for the chip sector. A lowered forecast for annual growth across the semiconductor industry from Taiwan Semiconductor Manufacturing hit chip stocks despite the Taiwanese company highlighting demand for processors to power artificial-intelligence technology.

"Although consensus earnings revisions have been negative since the beginning of the year, the first-quarter earnings season is unlikely to derail markets. In reality, the main risk is a slowdown in investment momentum in AI," wrote Yves Bonzon, chief investment officer of the Swiss private bank Julius Baer, in a research note.

For Nvidia to return to its recent highs and test new levels, it will likely need signs of increased investment in AI hardware from major technology companies reporting this week, including Facebook-parent Meta Platforms on Wednesday, followed by Microsoft and Google-parent Alphabet on Thursday afternoon.

Those companies are among the biggest buyers of Nvidia's graphics processing units, or GPUs, but are also making their own in-house alternatives. That sets up a double test for Nvidia -- it needs the big technology companies to continue pouring money into AI data centers and to signal that they intend to primarily spend that cash on its new Blackwell chips rather than custom or cheaper alternatives.

Among other chip makers, Advanced Micro Devices was up 1.0% and Intel was rising 0.9% in premarket trading.

Nvidia shares have risen 54% this year to date through to Friday's close. That compares with a 4.1% rise in the S&P 500 index and a 1.8% rise in the Nasdaq Composite Index over the same period.

Write to Adam Clark at adam.clark@barrons.com

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April 22, 2024 08:20 ET (12:20 GMT)

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