TLDR
- Nvidia shares rose 0.3% in premarket trading to $172.96 as investors await Big Tech earnings reports this week
- Major cloud companies expected to spend $330 billion on AI infrastructure in 2025, up 38% from previous year
- OpenAI plans to bring over one million GPUs online by year-end, primarily using Nvidia processors
- Top investor Brett Ashcroft Green downgraded Nvidia to Hold citing rapid price appreciation and high valuations
- Nvidia’s forward P/E ratio jumped from 21.31x in April to 39.75x currently, making it second-highest among Magnificent 7
Nvidia stock edged higher in premarket trading Monday as Wall Street prepared for a wave of Big Tech earnings that could fuel the next leg of the AI rally. Shares gained 0.3% to $172.96 ahead of what promises to be a crucial week for the chip maker.
The company that became the first ever to close above $4 trillion in market value earlier this month faces a key test. Major customers including Google parent Alphabet report earnings starting Wednesday.
Investors will scrutinize capital expenditure numbers from these tech giants. The spending represents purchases of AI data centers packed with Nvidia’s processors.
The largest U.S. cloud companies are expected to spend $330 billion on infrastructure in 2025. That marks a 38% increase from the previous year, according to Synovus Trust’s Daniel Morgan.
Alphabet previously indicated its capital spending would reach around $75 billion this year. Any upward revision would boost Nvidia’s prospects.
“The circular capex story at the top of the market remains intact,” Morgan wrote in a research note. Large tech firms continue investing in AI infrastructure, driving demand for semiconductors and related services.
The Trump administration’s recent investment commitments add another positive factor. Morgan believes the AI boom will continue in the near term given these developments.
OpenAI Ramps Up GPU Deployment
OpenAI provided fresh evidence of surging demand for Nvidia’s chips. CEO Sam Altman announced Sunday that ChatGPT’s developer would bring “well over” one million graphics processing units online by year-end.
The AI company primarily relies on Nvidia GPUs for training its systems. This massive deployment represents a major win for Nvidia’s data center business.
Other chip stocks also gained in premarket trading. Advanced Micro Devices rose 0.6% while Broadcom climbed 0.3%.
Investor Warns Against Chasing Rally
Not everyone shares the market’s enthusiasm for Nvidia at current levels. Top investor Brett Ashcroft Green urged caution despite the company’s strong fundamentals.
“The run has just been too far too fast,” explained Green, who ranks in the top 4% of TipRanks’ stock analysts. He downgraded Nvidia to Hold from his previous rating.
Green doesn’t question the long-term growth story. He sees potential catalysts including sovereign AI systems tailored to specific countries and regulations.
CEO Jensen Huang has championed these country-specific AI systems for years. The recent adoption of AI tools like Elon Musk’s Grok by the U.S. government could signal broader global adoption.
However, Green points to supply constraints that may limit growth. Nvidia likely cannot manufacture chips fast enough to meet soaring global demand.
Valuation Concerns Mount
The stock’s rapid appreciation has made it expensive relative to peers. Nvidia’s forward price-to-earnings ratio jumped from 21.31 times in April to 39.75 times currently.
This puts it as the second-highest valued stock among the Magnificent 7 technology companies. In April, it held the third-lowest valuation in this group.
“If you own it, hold it and enjoy the ride,” Green advised existing shareholders. For new investors, he recommended waiting for better entry prices.
Wall Street maintains a bullish consensus despite valuation concerns. Nvidia holds a Strong Buy rating with 34 Buy recommendations versus three Holds and one Sell.
The average analyst price target of $182.06 implies 6% upside from current levels. This suggests much of the expected growth may already be reflected in the stock price.
Nvidia received additional support from news that it can resume selling AI chips to Chinese customers after regulatory restrictions.
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