Nvidia Stock Gains, but the AI Hype Is Shifting Elsewhere

Nvidia’s rally has left it outpacing Wall Street targets; analysts have an average target price on the stock of $687.70, according to FactSet. What’s more, Its market value is now about equal to as much as the entire Hong Kong stock market, or H shares.

That has caused some investor angst. Aswath Damodaran, a professor who teaches corporate finance and equity valuation at New York University’s Stern School of Business, noted on his personal blog on Thursday that he plans to sell half his remaining holdings of Nvidia.

Investors also look to be focusing on other stocks poised to benefit from investment in AI.

Chip designer
Arm Holdings
and power-management device maker
Monolithic Power Systems
both surged on Thursday after their respective earnings, which were boosted by spending on AI. Both are now notably more expensive than Nvidia on a forward price-to-earnings basis but investors looked eager to spread their AI bets across the market.

However, Nvidia also appears to be seeking to diversify its business. The company is forming a business unit that aims to make bespoke chips for cloud computing firms and others, including AI processors, Reuters reported Friday, citing people familiar with the matter.

The unit would compete with custom silicon companies such as
Broadcom
and
Marvell Technology.
It could forestall concerns that customers are beginning to make their own custom chips as alternatives to paying up for Nvidia’s graphics processing units. Nvidia has met with
Amazon.com,

Meta Platforms,

Microsoft,

Alphabet
‘s Google and OpenAI over the plan, according to Reuters.

Nvidia didn’t immediately respond to a request for comment on the report.

Broadcom
shares were down 0.1%, while Marvell was off 3.3%. Among other chip makers on Friday,
Advanced Micro Devices
was up 2.4% and
Intel
was up 1.9%.  

Nvidia shares had risen 27% over the past month through Thursday’s close. The
S&P 500
has risen 4.5% over the same period and the
Nasdaq Composite
has gained 5.5%.

Nvidia’s trading volume of 41.4 million on Thursday was slightly below its 65-day average of 43.3 million.

Write to Adam Clark at [email protected]