Nvidia steadies above $200, needs Big Tech AI spending boost

Nvidia shares have steadied above $200, but the next leg higher depends on whether hyperscalers confirm continued AI infrastructure spending when Alphabet reports earnings this week.

"Street sentiment on the name is mixed, while Nvidia is the clear leader in Gen AI, concerns surround delays in Vera Rubin ramp timing and increasing competitive pressures," KeyBanc analyst John Vinh, who rates Nvidia overweight with a $330 price target, said.

Nvidia shares rose 0.93% to $204.69 on Monday, trailing the 1.8% gain in the PHLX Semiconductor Index. The stock has gained 8% year to date, lagging the S&P 500's 9% advance. Alphabet kicks off Big Tech earnings Wednesday, with investors focused on capital expenditure plans that could signal demand for Nvidia's processors through 2027.

The stakes are high because Nvidia controls more than 95% of the data center GPU market, a position that generated tens of billions in revenue last year. Any sign of slowing hyperscaler capex could pressure the stock, while strong commitments would reinforce the demand narrative ahead of Nvidia's own earnings later this season.

Competitive threats are also mounting. AI chip startup Etched, which builds processors designed specifically for AI inference workloads, is quadrupling its valuation to about $20 billion in a funding round led by Jane Street, according to people familiar with the matter. The San Jose-based company is also raising capital at a $10 billion valuation in a separate round led by Sequoia Capital. Etched is testing its initial chip design and working to fulfill $1 billion in customer demand, according to its website. Founded in 2022 by Harvard dropouts Gavin Uberti, Chris Zhu and Robert Wachen, Etched joins a wave of startups including Cerebras Systems and Groq trying to challenge Nvidia's dominance in inference — the process of running AI models after they have been trained.

Advanced Micro Devices is also gaining traction. The company said Monday that Microsoft will use its new Helios rack-scale system in data centers, joining Meta, OpenAI and Oracle as customers. AMD shares climbed more than 4% on the news. Helios, AMD's first direct rival to Nvidia's Grace Blackwell and Vera Rubin systems, combines AMD's GPUs, CPUs, networking and software into a single platform. The Futurum Group estimates Helios costs between $5 million and $5.5 million, compared with $3.5 million to $4 million for Nvidia's Vera Rubin. AMD holds about 4.5% of the data center GPU market, but the firm says eight of the top 10 AI companies run workloads on its Instinct GPUs.

Wall Street remains constructive despite sector volatility

Despite the competitive noise, several analysts see opportunity. Morgan Stanley's Joseph Moore described the recent semiconductor selloff as an attractive buying opportunity, saying the firm's preferred AI investments remain compute-focused companies such as Nvidia and Broadcom, according to a CNBC report. Oppenheimer included Nvidia in its latest "best of the best" momentum screen, which ranks stocks on risk-adjusted returns over six-, nine- and 12-month periods.

Nvidia shares trade at roughly 35 times forward earnings, a premium that hinges on sustained hyperscaler spending. Alphabet's earnings Wednesday will provide the first major test of whether that premium is justified. If the company and its peers reaffirm their AI infrastructure commitments, Nvidia's demand outlook could re-rate quickly. Any pullback in capex plans, however, would pressure the stock and validate the concerns that have kept it lagging the broader market this year.

This article is for informational purposes only and does not constitute investment advice.