Nvidia is no longer the cool kid of chip stocks
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Nvidia CEO Jensen Huang might need to lose the leather jacket, as a new crew of "cool kids" tops the chip sector.
Why it matters: As the largest U.S. company by market capitalization (now $5.4 trillion!), Nvidia has the single biggest influence on broad market cap-weighted indexes like the S&P 500.
- So, the market will benefit if Nvidia maintains its mojo.
State of play: Despite rising roughly 18.3% year-to-date, Nvidia is a laggard among high-flying computer chip stocks this year.
- And this is a company that was at the epicenter of the early market excitement over AI in 2023-2024.
The intrigue: Retail traders who played a big role in that run-up — Nvidia's shares surged 800% between the ends of 2022 and 2024 — have been distracted by the giant gains other chip stocks have posted recently.
- Since the end of March, Intel has soared by roughly 150% as the company announced blockbuster first-quarter earnings and sharply lifted its forecast for Q2 sales.
- Memory chipmaker Micron and CPU maker AMD have also more than doubled over that period.
- Nvidia is up 26.5% over that period, a more-than-respectable showing that trounced the S&P's 12.6% gain.
Stunning stat: Intel is up 200% so far this year, putting the stock on track for its best annual gain since 1975, when it rose 222%, according to FactSet data.
What's next: Nvidia reports quarterly earnings after the close of trading Wednesday, offering the chip behemoth the opportunity to recapture investor affection.
The fine print: Analysts expect Nvidia sales to be up roughly 80%, to $78.91 billion, compared with the same quarter last year. Earnings per share are expected to more than double, to $1.75.
Between the lines: Investors have come to see Nvidia's ability to deliver such remarkable results as almost a given.
- As a result, some analysts now think additional sweeteners — perhaps in the form of Nvidia boosting stock buybacks — could be required to kick the shares back into gear.
- "Other large-cap tech names in the same position have added incremental investors by boosting cash returns and appealing to dividend/income-oriented investors," Bank of America analysts wrote in a preview of Nvidia's quarterly numbers.
Bottom line: Nvidia's willingness to entice investors with such extras could be crucial to how the shares behave after Wednesday's earnings extravaganza.
