'Necessary respite': Nvidia quells fears of AI bubble before the end of 2025
Nvidia's strong third-quarter results have temporarily calmed investors worried about the shakiness of the artificial intelligence boom. Analysts were generally positive about the report of the world's most expensive company, noting the acceleration of revenue growth and improved profitability. However, experts warn that concerns about the AI bubble have not gone away - they have simply receded into the background.
What the analysts are saying
- Nvidia has "answered the call" by reducing investor anxiety that has been building on Wall Street in recent weeks, states Blaine Curtis of Jefferies. While not "all AI bears" will be happy, Nvidia has offered traders a sufficient "respite": its report should return trading in AI stocks to normal by the end of this year, Curtis added.
- Ben Reitzes, an analyst at Melius Research, is impressed with Nvidia's accelerating sales growth while improving gross margins. "What more did you want?" - he asks. Reitzes raised his target price on the company's stock from $300 to $320 (that's 70% above current levels), explaining that Nvidia's acceleration of revenue growth to above 65% with its business scale and margins should lead to a positive revaluation of the stock. He believes that Nvidia CEO Jensen Huang will continue to "flush the cachet of investing in potential AI winners" and capitalize on it.
- The positivity in markets following Nvidia's strong report and upbeat outlook may be temporary, said Daniela Hathorn, senior market analyst at Capital.com. "The strong results don't dispel fears of an AI bubble, but rather drive them beneath the surface, offering markets a brief respite," she wrote.
- Ryan Lee, senior vice president at Direxion, also said Nvidia's positive report gave the market a "much-needed respite" after mixed signals from the Fed ahead of its December interest rate meeting. "Clearly, the market heavyweight is not showing any signs of suppressed demand," Lee said, noting that the only "bearish signal" in Nvidia's quarterly report appeared to be the AI market leader's problems with establishing a "meaningful business" in China.
- Dan Morgan of Synovus Trust has grouped investor concerns ahead of Nvidia's earnings release under the three C's: Capex (capex), Circular financing, and Competition. He writes that "while these concerns have not been put to rest," questions can be deferred until the next earnings report, as the report released on Nov. 19 convinced investors that Nvidia has not learned to make money efficiently.
- Nicholas Amicucci of Evercore ISI points to the impact of the Nvidia report on energy stocks. In his view, "the acceleration in demand growth [for Nvidia products] continues to underpin the broader theme of power demand and suggests that any concerns about the scale of load growth associated with building AI infrastructure are significantly exaggerated."
How the markets are reacting to Nvidia's report
Shares of technology companies in Asia and Europe jumped on November 20. In Taiwan, the securities of TSMC, the world's largest contract manufacturer of chips and the main supplier to Nvidia, rose by 4.3%. In South Korea, quotes SK Hynix, the main supplier of high-speed memory chips for Nvidia, rose by 1.6%, and its competitor Samsung Electronics added 4.25%. In Japan, the leader of growth was the manufacturer of chip testing equipment Advantest - its shares soared by 8.8%.
European data center equipment makers Siemens Energy and Schneider Electric rose 8.4% and 2.8% on the moment, respectively.
Futures on the index of the largest U.S. technology companies Nasdaq 100 grow by 1.4% on November 20. Contracts for the S&P 500 add 1% in price, for the Dow Jones - by 0.4%. Shares of AMD, Nvidia's main rival, jumped 4.5% on the New York premarket. Chip makers Broadcom and Marvell Technology are up nearly 3%.
This article was AI-translated and verified by a human editor
