Nvidia Stock Rises on Dip-Buying: 3 Reasons to be Optimistic

Dow Jones
11/06

Nvidia stock was attracting bargain hunters early Friday after the chip maker's steep selloff. There are a few reasons to look on the bright side despite worries rocking the artificial-intelligence trade.

Nvidia shares were up 4.4% at $189.52 in premarket trading. If the move holds it will recoup some of its 9.3% loss the previous day, which marked its second largest one-day market cap decline on record and took it back to levels last seen in April this year.

There are three things which could be fueling some positivity. Firstly, Texas Governor-elect Gina Hinojosa suggested she wasn't outright opposed to data-center construction in the state, which is a particularly important hub for many of Nvidia's customers.

"It is not that I hate data centers. I hate the way they are taking advantage of Texas," Hinojosa said in an interview with CNN.

Hinojosa has previously called for new approvals on data centers to remain on pause until the Texas Legislature can meet next year to pass "real protections." Her latest words suggest developers might just have to meet stricter standards rather than facing a complete block on construction.

Secondly, Nvidia appears to be exploring ways to sidestep any data-center moratoriums. The company has approached private-equity firm Apollo Global Management about retrofitting telecoms facilities owned by Apollo-backed Brightspeed, a broadband provider, and turning them into small-scale AI data centers, The Information reported Thursday, citing unidentified sources.

Nvidia didn't immediately respond to a Barron's request for comment early Friday. The Brightspeed facilities have a total of around one gigawatt of available power, according to The Information, which could run billions of dollars worth of Nvidia chips.

And finally, Nvidia's earnings are coming on Nov. 17 and the stock has tended to rise in the weeks immediately preceding its report. As of Thursday's close, Nvidia traded at a forward price-to-earnings multiple of just 12.7 times according to FactSet and is slightly down for the year so far.

Nvidia was a Barron's stock pick in May when shares traded around $226 with a forward price-to-earnings ratio of about 24 times.

 

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