Nvidia (NASDAQ:NVDA | NVDA Price Prediction) CEO Jensen Huang clearly wasn’t fazed when AI stocks tanked after the overheated U.S. jobs numbers, which seemingly fanned fears of rate hikes to come. In fact, Jensen Huang sounded genuinely excited, noting that investors should be as well at the thought of buying stock at a “cheaper price.”
Indeed, it’s a hard concept for many momentum investors to grasp. Those who are looking to make a quick buck are likely looking at some of the rising stars in the AI chip space. And with mega-IPOs making a splash, there’s bound to be no shortage of market volatility in both directions on any given day for a wide range of reasons.
Investors should be excited when [AI] stocks drop!
Any way you look at it, market choppiness and big down days are to be expected, and for those with enough dry powder, they’re to be taken advantage of. Either way, Mr. Huang thinks the future for AI is “very bright,” and it doesn’t sound like a day of rate worries is going to rattle the man. Given Nvidia’s big investments across the AI scene, I’d argue that a big drop in AI stocks actually works in the man’s favor, especially if it’s tied more to the trajectory of rates and less to the actual progress in the AI boom itself.
In this piece, well look at three names that I think make sense to give a second look as the market had renewed rate hike worries following Kevin Warsh’s first FOMC speech. Rates held steady, but the vibe and a subtle hint of a rate hike were detectable.
With no “dot plot,” perhaps investors are being put in the dark a bit. But my guess is that Wednesday’s worrisome drop isn’t anything more than another day for investors to add to a position at a slight discount. I’ll take a slight discount over no discount, especially if you’re nearly as bullish as Nvidia’s top boss.
Nvidia
Nvidia stock is an obvious candidate to consider on some of the more turbulent days in this ongoing AI bull market. Shares dipped over 1% on Wednesday and for no real good reason. While that’s a slim discount, I do think investors might wish to consider paying what I think is a fair price for a dominant company that has a lot to gain as the AI boom advances further.
At 31.3 times trailing price-to-earnings (P/E), I think the value case is real. And even with the rise of custom silicon, I think that Vera Rubin is just going to stay a cut above (or maybe several cuts) as the agentic era lands.
Doubt Nvidia’s ability to keep selling at hefty prices, if you will, but until evidence surfaces that points to a cooling off in AI demand, it feels like Nvidia stock is way too cheap for its own good. If anything, a digestion phase for AI might already be partially baked in. In reality, the trajectory points to the opposite as Nvidia readies for $1 trillion in revenue.
Taiwan Semiconductor
Taiwan Semiconductor (NYSE:TSM) is at the top of the chip world. And while it faces competition in the future from the likes of Elon Musk’s emerging Terafab and Intel (NASDAQ:INTC), I just don’t see Taiwan Semiconductor losing business, given AI demand and its limited bandwidth.
There is no mystery that Terafab has a high chance of not being a success. That’s one of the big risks. But, of course, the rewards if such an effort succeeds stand to be enormous.
For the time being, Taiwan Semiconductor is pretty much the only game in town. It’s at the frontier and is the Nvidia of the foundry, so to speak. Even as rivals move in, the firm will just stay a cut above every step of the way. At 37.1 times trailing P/E, the shares still seem quite cheap compared to where AI demand could go next.
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