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Nvidia (NVDA) stock closed at an all-time high on Monday. Wall Street is bullish on the stock, including Constellation Research’s Ray Wang, who told Yahoo Finance that “Nvidia is leading the way” when it comes to AI, adding that the company still has a “long way to go.” He said he has a lot of technical ability. How long does it take for competitors to catch up?
But Yahoo Finance executive editor Brian Sozzi says there are some red flags for AI stocks going forward. Watch the video above to hear his 3 potential warning signs for Sozzi from companies like HP Inc. (HPQ) and Salesforce (CRM).
For more expert insights and the latest market trends, click here to watch the full episode of Yahoo Finance Live.
Editor’s note: This article was written by Stephanie Mikulich.
video transcript
Josh Lipton: Nvidia once again closed at an all-time high in today’s trading. Let’s look at some numbers about the bull market to watch. It’s already up about 75% this year. More than $800 billion in value was added. In other words, it currently lags behind Apple and Microsoft in terms of market capitalization.
The streets here aren’t at all worried about the kind of movement we saw. We still love the name and nearly 90% of us are still considering purchasing it. Nvidia does not sell it. Investors love to bet on this company’s last earnings report, Julie, and obviously, incredible sales growth. They will continue to bet.
Julie Hyman: And we just talked to Ray Wang. He also loves stocks. In fact, I don’t think I’ve talked to anyone in recent weeks who says they hate Nvidia.
Josh Lipton: I’m not sure, and I’m also not sure if anyone has found a neutral bystander at this point. And in part, you mentioned Ray, I think he’s making a point that we’ve heard a lot, at least from bulls, that we’re talking about competition. That’s it. And Ray’s point is, yeah, I mean, obviously we’re seeing a move like that, it’s going to bring in competitors, AMD and Intel, and even Nvidia’s own customers.
Julie Hyman: And in-house chips too–
Josh Lipton: Yes, for the cloud giant. But at least Ray makes his point and slams the table and at this point he says Nvidia is way too far ahead.
Julie Hyman: Lots of table pounding.
Josh Lipton: a lot. It’s a huge amount of excitement, yes.
Julie Hyman: Okay. Yahoo Finance Executive His editor Brian Sozzi takes you through the key points of the trading day.
Brian Susie: I’m banging the table for market control. Let’s go, everyone. Really, look, I understand what you’re saying about Ray Wang. I mean, he’s a very knowledgeable guy and I really enjoyed listening to him talk backstage. But I think he left. Or I think I came in with the sense that I was an investor in this platform. And NVIDIA is going up every day.
For Nvidia, it took about 180 business days to go from $1 trillion to $2 trillion in market cap. It’s like news, but none of it is normal. And it’s not. As seen in today’s trading, NVIDIA will be up about 6% each day. That’s my theme for this corner.
This AI trading has some warning signs that no one cares about and no one wants to talk about it. That’s why I emphasize it. HPE released its earnings last week, and its stock price fell. Sales decreased by 14%. They were warning about people not being able to install AI infrastructure.
Where is the power? Where is the energy? All of this is heating up. How do you put something like this on your property and make a lot of money for warning flags? The second one is HP, or HP Inc. Although the company sells his PCs, it does not intend to specifically consider its outlook for the second half of the year on how AI PCs will impact its sales. They didn’t come out. They didn’t come out and say, “We think PCs are going to explode.” why? Because no one knows.
And last but not least, this week we’ll be keeping a close eye on Salesforce. They will be holding a product demo day where they will be announcing a lot of AI. But when we talked about this on the earnings call last week, everyone ignored it. Maybe the market didn’t want to hear about more AI tools from Salesforce, or maybe it didn’t want to bake in profit expectations from new AI tools.
Either way, there are red flags. AI stocks don’t go up every day. I understand what Ray Wang is saying. We appreciate having him at our big show presentation, but there are concerns investors should be aware of here.
Josh Lipton: But Brian Sozzi, you make a very good point. You have to stay nimble. However, I want you to understand this: If I’m going to channel my inner His AI bull, I’m going to say, “OK, you’re going to pull his HPE and Mr. Benioff out.” Probably. I could see Mr. Dell probably somewhere in Texas with a big smile on his face.
Brian Susie: They sell computers. I don’t even know if Dell still makes them–
Josh Lipton: But, but this, I mean, they not only defeated the consensus, they gave guidance that easily defeated the consensus. And that was partly a positive trend in AI.
Brian Susie: it was. I think it will take time for much of this AI infrastructure to be built. The idea is that if we get here, we can increase the backlog and these stocks will go up linearly like they did last year. I think they’re starting to get seriously concerned about whether that’s going to happen. That’s what I want to say this week.
Now, I think one of the real implications of this move is whether Salesforce launches this week, Josh, that outlines a number of new AI tools and reveals some pricing. When they revealed the price of the AI tool last year, it sent the stock higher. If they let the market yawn and reveal these things, I think that would be a huge red flag for the AI industry.
And actually, I think we also need to pay attention to what the Fed said this week. If they don’t give us any direction on what to do with interest rates this year, if they agree with Torsten Slok of our parent company Apollo, if they–
Josh Lipton: There are no cuts.
Brian Susie: There are no cuts. They’re not going to blow up the AI trade.
Julie Hyman: They wouldn’t do that.
Brian Susie: They could at least suggest that one word, Jerome Powell, could detonate this AI trade.
Julie Hyman: They’re not suggesting they won’t cut rates this year.
Brian Susie: Well, if that happens, AI trading will be wiped out.
Julie Hyman: yes. And if I–
Brian Susie: However, if there is one rate hike or one rate cut, I think AI trade will be hit hard. I think a big factor driving this AI trade is the fact that there could be two or three rate cuts this year. But if that doesn’t happen, this deal could completely fail.
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