Weekly Update 02/06/2024
The AI Craze Continues
Nvidia hits another record high
Goldman Boosts PT on AI Prospects
Palantir Jumps 30% in 1 day!
Super Micro Computer Dominates AI Market
Free Market? Delaware Court Rejects Elon Musk’s $55.8B Pay Package
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—Market Madness—
Nvidia hits record high as Goldman Sachs boosts PT on AI prospects
Nvidia’s shares NVDA.O scaled a new peak on Monday after Goldman Sachs raised its price target for the high-flying chipmaker’s stock in anticipation of a major boost to its earnings from the artificial intelligence (AI) boom.
The stock rose about 4% to $689.21 and looked set to add about $70 billion to the company’s market capitalization. Nvidia was valued at $1.63 trillion as of Friday’s close.
Nvidia has emerged as a poster child of the AI frenzy and saw a record monthly jump in its market value in January.
The searing growth in the stock price – already up about 39% so far this year – has made it more expensive to own relative to its peers. Nvidia’s shares trade at 31.4 times the company’s forward earnings estimate, compared with the industry average of 22.9.
Still, Goldman Sachs analyst Toshiya Hari sees more room for growth.
“We believe Nvidia will remain as the industry gold standard for the foreseeable future, given its robust hardware and software offerings and, importantly, the pace at which it continues to innovate,” Hari said.
The bank also lifted its full-year 2025-2026 earnings estimates for Nvidia by 22% on an average, citing signs of robust AI server demand and improving graphics processing unit (GPU) supply.
Hari pointed to signs of AI monetization from companies including MicrosoftMSFT.O and Meta PlatformsMETA.O as well as positive earnings outlook from AI server maker Super Micro ComputerSMCI.O.
While Nvidia has unlocked billions in revenue on the back of the AI frenzy, other chipmakers that are not so deeply involved in making chips for AI, such as Intel INTC.O, have seen their shares lag.
Nvidia is set to report results on Feb. 21, with analysts expecting fourth-quarter earnings per share of $4.51 and revenue of $20.19 billion, according to LSEG data.
Investors should brace for markets to hit an ‘air pocket’ after recent rally | Tom Lee
Why Super Micro Computer Stock Popped 14% Today
Shares of Super Micro Computer (SMCI 2.75%) jumped today, continuing a rally sparked by last Monday’s strong earnings report, even though there was no company-specific news out on the company stock today. Instead, what seemed to drive the stock higher was a bullish note from Goldman Sachs on Nvidia (NVDA -1.60%) and the broader AI hardware industry.
Nvidia and Supermicro have both been big winners in the AI boom so far. Each one is seeing soaring demand for their products, which are well-designed to meet the kind of intense computing needs that large language models like ChatGPT require.
As a result, Supermicro stock finished the session up 14.4%, while Nvidia stock finished up 4.8% on the news.
Wall Street gets more bullish on Nvidia and Supermicro
In an analyst note this morning, Goldman Sachs raised its price target on Nvidia from $625 to $800 and kept a conviction buy rating on the AI chipmaker.
The analyst sees positive data points on infrastructure spending, as well as “robust” AI server demand and an improvement in GPU supply.
Those comments were bullish for Supermicro as the company specializes in servers and storage equipment that can handle intense workloads such as those required to run generative AI programs.
Supermicro has also been supply constrained with regard to GPUs, but the company said supply was improving as the comments above seem to confirm. Improving GPU supply could allow the company’s guidance to improve and for it to beat its guidance for the rest of the year.
Learn: Use The 50-Day Moving Average To Pinpoint Opportunity Or Risk
An ax can be either a useful tool or a dangerous weapon. In stock charts, the 50-day moving average has a similar dual nature. The 50-day moving average takes a stock’s prior 50 closes and averages them. Do this every day in an upward-trending stock, and you’ll get a line on a chart that runs below the stock’s price bars while smoothing out the jumps and buckles.
The line serves a startling number of uses. When a stock is basing, a cup base with more than half of its bulk above rather than below the line is a sign of health. Another sign of a stock’s strength: a flat base that finds “support” at its 50-day line.
What is support? Institutional investors often use the 50-day or 10-week line as a reference point, stepping in to add shares to their positions when a stock pulls back to the moving average. This buying creates upward pressure — or price support — to help keep the stock’s prices above that moving average.
This is why rising stocks often rebound from their 50-day lines, turning brief pullbacks into follow-on buying opportunities. It is also why 50-day and 10-week moving averages tend to cradle advances that can run across many months.
On the dangerous side, a rallying stock that collapses below 50-day support in heavy volume is often sending a sell signal. Once below that line, institutional investors may use the 50-day line to mark a sell level. Short sellers may use the line as a level at which to sell shares short.
These forces create a level of resistance. Stocks often need a large boost of buying power to muscle back above their 50-day lines after losing that level of support.
There are other, similar moving averages. Most common is the 10-week moving average. This line tracks a stock’s weekly closes over the prior 10 weeks. It generally tracks fairly close to the 50-day line. So if you are reading a daily chart, use the 50-day line. If you’re analyzing a weekly chart, use the 10-week.
There is a similar relationship between the long-term 200-day and 40-week averages. On a daily chart, use the 200-day. On a weekly chart, it’s the 40-week line.
‘The Messi of AI’ reports, Tesla struggles continue, and more
Good morning, and welcome to Tech News Now, TheStreet’s daily tech rundown.
Tech earnings continued Monday with the fourth-quarter earnings results of Palantir (PLTR) , which pushed the firm’s stock up nearly 20% in after-hours trading. Wedbush’s Dan Ives boosted his price target in response to the report.
Tesla (TSLA) shares, which have been on a steady decline for the past month, fell further Monday, and the case of the U.S. versus Google (GOOGL) will begin its trial in September.
Tech earnings season continues this week, with Snap SNAP reporting after the bell Tuesday, Disney DIS, Uber UBER and Roblox RBLX reporting Wednesday, and Cloudflare NET up on Thursday.
Palantir, the software and artificial intelligence company perhaps best known for its government contract work, reported earnings of eight cents Monday, in line with analyst expectations. But the company reported revenue of $608.4 million, beating analyst expectations of $602.4 million.
“After nearly two decades of investment, we have positioned ourselves as a fundamentally new software business, and our results reflect this ongoing transformation,” CEO Alex Karp said in his annual letter.
The company said that U.S. commercial revenue grew 70% year-over-year, and its U.S. customer headcount spiked 55%. The company brought in a total of $2.23 billion in revenue in 2023; it expects to see at least $2.6 billion in revenue in 2024.
The stock surged around 20% in pre-market trading, jumping from $16.72 per share at close to $20.08 before market-open.
Ives boosted his price target to $30 from $25, saying that Palantir remains an “undiscovered gem and a core part of our thesis in the AI revolution.”
“Last night for Palantir was when this company went from an off-Broadway play to a primetime Broadway theater right off of Times Square under the bright lights,” he wrote in a client note, highlighting the surge in commercial business.
He believes Palantir will be included in the S&P 500 on the “near-term horizon.”