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Nvidia earnings is 'Taylor Swift moment' for tech bulls: Dan Ives

Nvidia (NVDA) reported its fourth-quarter earnings after Wednesday's market close, surpassing Wall Street expectations, and turning the stock around after shares were previously dropping. Already a leader in the semiconductor category, Nvidia's strong earnings have most likely set the stage for the AI race in 2024.

Wedbush Securities Managing Director and Senior Equity Analyst Dan Ives and Paul Meeks, Harvest Portfolio Management Co-CIO and The Citadel Finance Professor, join Yahoo Finance to discuss Nvidia's earnings and the AI-momentum for the tech sector.

When asked about potential risks for Nvidia, Ives responds: "You look at CapEx in Big Tech, the strong is getting stronger. When you look at Microsoft (MSFT), they're still in acceleration mode. So that's just not a worry for at least the next 12, 15, 18 months. And remember, you haven't even had the consumer piece start to come in. That's why I believe it's a 1995 moment... Right now, I think the big focus is second, third, fourth derivatives. The Godfather [CEO Jensen Huang] spoke, who else benefits? That's why I believe this AI party is just getting started."

When asked about OEMs (original equipment manufacturers) who may benefit from this momentum, riding the coattails of Nvidia, Meeks responds: "I don't necessarily see that much of a play in some of the hardware OEMs. I think we continue, for some time, at least the rest of this calendar year, maybe through next year, with a build-out of large language models and the inference from those models. And so I see opportunities, maybe in hardware, something like a Super Micro (SMCI) that was hammered hard in the anxiety heading into Nvidia's print..."

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For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video transcript

SEANA SMITH: But let's take a look at this move that we're seeing in pre-market trading. You've got shares up just about 11%. This coming after the AI powerhouse does it yet again shares soaring after reporting another quarter of record sales. Also, the company issued strong guidance. This showing that momentum for the AI boom still remains well intact.

Let's break it all down, we want to bring in Dan Ives, Wedbush Securities Managing director and senior equity analyst. We've also got Paul Meeks, Harvest Portfolio Management Co-CIO. It's great to have both of you. Dan, let me start with you. I have your note pulled up right in front of me. You called this a game changer moment for tech Bulls and AI revolution. What does this tell us just about the momentum that's behind AI investment right now?

And what that's going to do not only for NVIDIA, the leader within this space, but what it means for many of its rivals out there as well?

DAN IVES: Yeah. I mean, look the godfather of AI Jensen NVIDIA spoke and this is going to fuel the rest of this tech ecosystem from the hyperscale players Microsoft. You look at Google, Amazon and others. And I believe there's a start going back to the fall of a new tech bull market. It's a Taylor Swift moment for tech Bulls and this is something where it's get out the popcorn, the Bears go back deep into hibernation mode.

BRAD SMITH: Paul I want to bring you in here. I mean, when we hear on the call that Jensen Huang talking about the company's ecosystem and specifically, who plays into that ecosystem. It's the OEMs. It's these original equipment manufacturers and design manufacturers as well. How much does this permeate to some of those OEMs who can also ride on the coattails of this demand that NVIDIA is seeing for its generative AI products?

PAUL MEEKS: I actually, only want to appear so I can see what Dan Ives, my buddy's wearing today. That's always my trigger.

BRAD SMITH: He's in hoodie Dan mode. I don't know who's better. Hoodie Dan or Hoodie Melo.

PAUL MEEKS: I love it.

BRAD SMITH: He's got it. Go ahead Paul.

PAUL MEEKS: [INAUDIBLE] Dan. All right. So here's what I think, I don't necessarily see that much of a play in some of the hardware OEMs. I think we continue for some time. At least the rest of this calendar year, maybe through next year with the build out of large language models and then the inference from those models.

And so I see opportunities maybe in hardware, something like a micro that was hammered hard on the anxiety heading into NVIDIA's print, of course, now they'll continue to rise with NVIDIA. But infrastructure build, first and foremost for another couple of years before we really see plays in like for example, the AI driven PCs. We'll see how that plays out for folks like Hewlett Packard and Dell.

But I am still squarely with AI and the continued build out of large language models. And then inference before we step into that next realm. Because again, I don't think it's going to happen for a year or so.

SEANA SMITH: Dan, the largest customers of NVIDIA is big tech. You've got Amazon, Meta Microsoft, Alphabet making up about 40% of NVIDIA's revenue. I bring this up because it begs the question, what happens when we start to see a reduction in CapEx from some of these larger players? Is that a risk to NVIDIA or how should investors be thinking about that?

DAN IVES: Look, I think Paul nailed it and he's been early on AI as well. I actually think three months now in video reports, he could be wearing my hoodie maybe for the next quarter. But look it comes down to I'm-- you look at CapEx, the big techs, the strong getting stronger. I mean, when you look at Microsoft, there's still an acceleration mode.

So that's just not a worry for at least the next 12, 15, 18 months. Remember you haven't even had the consumer piece start to come in. That's why I believe it's a 1995 moment, Paul hit on it, the infrastructure. Right now, I think the big focus, second, third, fourth derivatives, the godfather spoof. Who else benefits? That's why I believe this AI part is just getting started.

BRAD SMITH: Dan just to follow up on that, what is the consumer pick up? What does that early adoption need to look like in some of the core hardware and devices that this is going to play a huge role within and perhaps be lighter fluid for the way that we even engage with technology that's at our fingertips or in the workplace?

DAN IVES: Well, Brad, right now it's all about enterprise. I mean, that's the Golden Goose for the next call, it's 12, 18 months from natural growth perspective. The consumer, that's what Meta is looking at. We believe Apple that's what they ultimately unveiled, WWDC. You look at how Google is going to play this. That's going to be a 2025, 2026, which beats what Paul said. I mean, this is just the beginning of this AI revolution.

SEANA SMITH: So it's just the beginning of this AI revolution. But talk to us just about how extensive NVIDIA specifically their moat is and if it goes beyond that right now, if we're talking 5, 10 years down the line. Who else do you see as amongst the leaders within the space?

PAUL MEEKS: So are you asking me? Sorry.

SEANA SMITH: Yeah, Paul.

PAUL MEEKS: OK. Yeah. So I do think that AMD, which is a company that had been given up for dead years ago but it's very well managed now under Dr. Lisa Su. They will take some share now. They will take some share though NVIDIA whether it's the continued build out of large language models or even in inference will continue to have, not the total share, which is essentially what they have now.

But they'll still have a dominant share. But AMD should play a role. And also I probably would give and I have this in my portfolio. Some kudos to Taiwan Semiconductor. Taiwan Semiconductor will continue to enable all these folks. So I like not just NVIDIA, I like super micro, I like Taiwan Semiconductor, I like some of the other semiconductor capital equipment companies like ASM.

And then of course I do think AMD, Advanced Micro Devices will gain some traction.

BRAD SMITH: Dan and Paul, great to have both of you here on the day. We know that there are a ton of calls that are coming out this morning after this NVIDIA earnings beat here with Jefferies saying it's the de-facto ecosystem standard for AI. We're going to continue this conversation, Hoodie Dan and soon to be Hoodie Paul as well. Joining us here.

PAUL MEEKS: Soon to be baby.

BRAD SMITH: Yeah. Thanks, guys appreciate it.