What Nvidia says about AI chip demand could matter for more than just the tech trade

What Nvidia says about AI chip demand could matter for more than just the tech trade

Enthusiasm for artificial intelligence has spread across the stock market.

Nvidia from Wednesday evening (NVDA) the call for results will be mark one year since the chipmaker first shocked Wall Street with its demand for AI chips. Since then, mentions of AI have skyrocketed during earnings calls, increasing 186% since the first quarter of 2023, according to Bank of America Research.

This comes as the conversation around AI has quickly shifted away from AI chipmakers like Nvidia (NVDA) and AMD (AMD) to experienced AI users like Alphabet (GOOG, GOOGLE), Meta (META), Amazon (AMZN), and Microsoft (MSFT). More recently, strategists highlighted an expansion to other sectors that could benefit from increased energy consumption, such as energy (XLE), Utilities (XLU), and raw materials.

“It’s not just about NVDA anymore,” Ohsung Kwon, Bank of America’s U.S. and Canadian equity strategist, wrote in a note to clients Monday.

This change is already happening in the market. Several precious metals, including copper (HG=F), who strategists say will benefit from AI spending, reached recent highs. The utilities and energy sectors are two of the best performing sectors in the S&P 500 (^GSPC) this year, up about 15% and 13% respectively.

This has trickled down to individual names that now rival the meteoric rise in Nvidia shares since the start of 2024. Texas-based Vistra Corp (VST) is up about 140% this year, while Constellation Energy (CEG) shares are up nearly 90%, roughly in line with Nvidia’s rise this year.

In a note released Sunday, Mike Wilson, Morgan Stanley’s chief investment officer, listed utilities as an overweight sector, noting that it offers “advantage for the power of AI theme.” Wilson noted that Morgan Stanley’s Power and Utilities team estimates that electricity could increase from 3% of total U.S. consumption in 2023 to about 10% by 2030, thanks to new data centers in AI 50 times larger than the previous ones.

“Both traditional and alternative energy providers have upside potential amid a growing need for AI data center power and more favorable data center energy deals,” Wilson wrote .

And businesses have also played their role in the development of AI.

Research by Goldman Sachs’ equity strategy team, led by David Kostin, shows that mentions of AI soared in the first quarter. More than 66% of energy companies mentioned AI during their earnings calls this quarter, up from 19.1% last quarter.

Given the overall implications, investors will be closely watching Nvidia’s AI chip demand report.

Nvidia has repeatedly surprised investors on this front so far, continually beating analysts’ expectations for quarterly results and improving its outlook for the coming quarter amid strong demand for its AI servers.

Whether this trend continues or is interrupted could now have repercussions across various sectors.

“If the markets wake up and say, ‘Hey, maybe we got a little too excited about this and maybe we slightly advanced some of these earnings,’ and that’s reflected in these valuations,” estimates the global JPMorgan Asset Management market. strategist Jack Manley told Yahoo Finance“That’s where I think you have the potential to have a bit of a shaky road.”

What Nvidia says about AI chip demand could matter for more than just the tech trade

The Nvidia Corporation logo is displayed on a smartphone screen, with a graphical representation of the stock market in the background. (Rafael Henrique/SOPA Images/LightRocket via Getty Images) (SOPA Images via Getty Images)

Josh Schafer is a reporter for Yahoo Finance. Follow him on @_joshschafer.

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