Nvidia Nears A Buy Point On Its Way To A Record Closing High

NVIDIA's stock price surged to a new all-time high closing on Monday (October 14th) after a four-month interval. This AI-centric semiconductor manufacturer, deemed irreplaceable in the era of artificial intelligence, appears poised to potentially surpass Apple once again to become the world's most valuable company by market capitalization.

Due to investor confidence in both current and next-generation AI chip demand, NVIDIA's stock rose by 2.4% on Monday, closing at $138.07. This increase pushed NVIDIA's market value to $3.39 trillion, slightly below Apple's $3.52 trillion but surpassing Microsoft's $3.12 trillion. In June of this year, NVIDIA briefly surpassed both Microsoft and Apple, becoming the world's most valuable company. Although Apple reclaimed the top spot, the market values of these tech giants have remained closely competitive in recent months. NVIDIA, Apple, and Microsoft collectively account for about one-fifth of the S&P 500 index's weight, thus significantly influencing the index's daily fluctuations.

Currently, NVIDIA has surged nearly 14% this month, remaining the second-best performing stock in the S&P 500 index year-to-date. In the intense competition among Google, Microsoft, Amazon, and other major tech companies for emerging AI technology, NVIDIA, playing a pivotal role, has emerged as Wall Street's biggest winner. TD Cowen analysts noted in a recent report, "We believe major companies in the AI field face a 'prisoner's dilemma' investing environment—each company is driven to continue spending, as the cost of not doing so could be (potentially) devastating."

Behind this strategic game, NVIDIA appears to be positioned favorably. TD Cowen recently reiterated a $165 target price for NVIDIA, labeling it a "top pick" for investment and indicating strong ongoing demand for the company's current generation AI chips.

Market confidence in NVIDIA remains high. In August, NVIDIA confirmed reports of a delay in ramping up production of its upcoming Blackwell chip to the fourth quarter, but downplayed its impact, stating that customers are eagerly purchasing existing chips. NVIDIA's CEO, Jensen Huang, stated earlier this month that the Blackwell chip is "fully ramped" and market demand is "insane."

A report by Morgan Stanley analysts following a meeting with management stated that orders for the Blackwell chip are "backed up around 12 months," indicating robust business performance and a promising outlook.

These sentiments reinforce the view that NVIDIA remains a top investment choice in the AI sector, especially as major companies continue to focus on their AI initiatives. For instance, according to analysts' average estimates compiled by the media, Microsoft is expected to increase capital expenditure by nearly a third in the 2025 fiscal year, reaching around $58 billion.

Zehrid Osmani, portfolio manager at Martin Currie Investment Management, mentioned, "There were concerns about the impact of the production delay of the Blackwell chip, so these new developments are reassuring."

In addition to optimism surrounding the Blackwell chip itself, recent sales figures from TSMC also indicate strong demand for AI chips. OpenAI's recent funding round has valued the company at $157 billion, and it has introduced a reasoning-capable AI model (Google is also researching a similar model), indirectly boosting confidence in NVIDIA's prospects within the AI and chip sectors.

On Monday, other AI chip and hardware stocks in the U.S. market—such as ARM, Qualcomm, Broadcom, AMD, and Micron—all saw increases, with TSMC reaching a record closing high alongside NVIDIA.

John Belton, portfolio manager at Gabelli Funds, stated that these events "reignite interest in the AI sector, with excitement around the use cases for inference-based AI. Inference represents a new area for NVIDIA, and given its computational intensity, this could be a significant new product category."

Belton continues to view NVIDIA as a core holding, believing that AI will bring "steady demand" over the years. "This is not an undiscovered stock, but if it can deliver on its expected numbers, the valuation remains reasonable."

Notably, recent activity in the options market also reflects optimism about NVIDIA's future. Last Thursday saw a surge in call options buying for NVIDIA, with holders able to purchase over 30 million shares of NVIDIA at prices ranging from $150 to $189 by March next year. This range represents an increase of 8.6% to 36.9% over Monday's closing price for NVIDIA.

According to industry data compiled by the media, analysts currently expect NVIDIA's revenue to more than double this fiscal year and increase by 44% in the next fiscal year. Market expectations for NVIDIA's earnings and profits have been consistently revised upward in the past quarter.

NVIDIA's strong profit growth prospects have made its valuation metrics less intimidating, further encouraging bullish sentiment. The company's forward price-to-earnings ratio is currently around 37 times, representing a premium compared to the Nasdaq 100 index but below NVIDIA's five-year average and significantly lower than the peak forward P/E ratio of over 44 times seen in June.