Bears were pummeled Thursday at the opening bell after researchers at another investment firm raised the price target for shares of Nvidia (NVDA), states Jon Markman, editor of Strategic Advantage.
Bulls quickly spread out across all of the major tech sectors. The Nasdaq 100 index closed at 18,298, a fresh closing high. Analysts at Mizuho Securities now believe Nvidia shares could rally in the intermediate term to $1,000 as the robust buildout for artificial intelligence infrastructure continues. Their work indicates that Nvidia might claim $280 billion of that market by as soon as 2027. This would be a remarkable feat. Nvidia posted data center sales in 2018 of only $9.7 billion. An increase to $280 billion in data center business in only three years will make that franchise as large as Apple’s iPhone juggernaut and grow faster. Nvidia shares closed up 4.5% to a record high.
Bears are incredulous. They say investors are too optimistic about AI and infrastructure rollouts. This may be wishful thinking on the part of bears. After the close on Thursday, executives at Broadcom (BRCM) posted blockbuster financial results on the back of strong growth for the firm’s AI infrastructure products. Hock Tan, chief executive officer, said in a note to shareholders that Broadcom is seeing strong demand for networking gear from AI data center customers. Tan was also bullish on Broadcom’s custom AI accelerator segment. This business supplies products to hyperscalers building customized AI systems. Tan still expects $50 billion in 2024 total sales and a whopping $30 billion in profits. Revenue for the first quarter was $11.9 billion, up 34%, with $4.8 billion in cash flow from operations. This is an incredible business, and the motor is AI.
People inside the semiconductor industry say that AI is accelerating demand for chips. Broadcom shares traded about 3% lower following the report. The weakness probably stems from Tan’s decision not to raise financial guidance. A pullback to $1,306 would be a gift to the Bulls. Shares of Nvidia, Taiwan Semiconductor Manufacturing (TSM), and Cadence Design (CDNS) were all trading higher in the after-hours despite the weakness in Broadcom. If the Nasdaq 100 begins Friday above $18,350, bears will concede a rally to 18,859 before the end of the month. Bears hope that bulls will eventually exhaust their buying power. There is important support at 17,893, the rising 20-day moving average.
