The semiconductor shortage won’t taper until 2023: Strategist

Brad Gastwirth, Wedbush Securities Chief Technology Strategist joins the Yahoo Finance Live panel to discuss the latest Nvidia earnings.

Video transcript

JARED BLIKRE: JARED BLIKRE: Time to talk Nvidia because that stock is up 6% now after beating on earnings, a focus on data center. And to talk about this, we have Brad Gastwirth. He's a Wedbush Securities chief technology strategist. Brad, thank you for stopping by here.

So a lot of talk around the data center. And I'd like to get your thoughts on that. But also, what about the crypto trade here? How is that influencing sales of their GPU?

BRAD GASTWIRTH: Yeah, it's a very good question on the crypto side. On the data center, I'll start there. And the strength was incredibly strong. I mean, it beat almost every analysts' expectations out there. And it's nice to see that acceleration. That's really the most important thing to look at the story. And that's why the stock is up 6% today.

Now, to your point on the crypto side, this was the biggest concern and headwind really heading into this quarter. Now, if you look at traditional valuation metrics, Nvidia video is incredibly expensive. Now, one thing I've always liked to say, it's not the valuation. A stock is either expensive on the way up or cheap on the way down. It's really where are the fundamentals and where are the real numbers going?

And if you look at the data center side, that gives investors more confidence. On the crypto side, the thing that I think actually calmed investors as well is Jensen did guide for CFP revenue to be lackluster going forward. Now, the CFP side is part of the crypto trade. So that being said, if they're not expecting that to be a growth driver, that calmed investors that that should not be a big area of concern when that does taper down.

So I think when you have this whole proof of stake change within Ethereum, you see what's going on, I think that's important. That makes less GPUs needed. That being said, the other business areas for the company are really ho-hummy. And it's hard to really fight that.

AKIKO FUJITA: Brad, beyond Nvidia, let's pull out a bit to look at the semiconductor space overall. We've gotten, within the last week, reports of Toyota potentially having to shut things down because of a chip shortage, GM as well. Where do things stand on that front? And from an investment standpoint, who do you think is best positioned to ride out the supply constraint?

BRAD GASTWIRTH: Yeah, Akiko, and it's such a good question and such an important topic. And truly, the semiconductor shortage was one of my top three tech predictions for 2021. I expected this to be a lot more severe and last a lot longer than most people thought. And is still believe so. I really don't believe this gets settled next year. I think this tapers into 2023. Most people are not expecting it to last that long. And I actually think the semiconductor bull market will last for several years.

Now, every one of these auto manufacturers are being impacted, from Toyota, Hyundai, Honda, GM, Ford, Tesla, Faraday. Every manufacturer is mentioning the shortage of chips supply.

Now in terms of how do you play this from an investment perspective, there's a lot of different ways. You can either just go to the semiconductor market, the chips that go into these auto manufacturers. I think foundry is a really easy way, it's a low bank shot way to plate this up-cycle.

One, if you look at semiconductor content going into automobiles, it's increasing exponentially. The foundry area has not invested enough capacity and increased their capacity expansion enough to really settle this demand for a number of years. So this is very bullish for semiconductors, very bullish for foundry. I expect pricing and margins to really, across the board, go up.

AKIKO FUJITA: Always good to get your takes there. Brad Gastwirth, Wedbush Securities chief technology | joining us today.