Nvidia Remains AI Bellwether, Shares Surge Over 7% in Pre-Market

Nvidia shares rose more than 7% in pre-market trading on Thursday as investors digested the company's quarterly results and optimistic commentary on AI demand. The company delivered beats on both revenue and earnings, while management conveyed that AI infrastructure buildout is "proceeding at full speed."

The tech giant reported second-quarter revenue of $96.22 billion, adjusted earnings per share of $2.22, and a gross margin of 75.0%. CEO Jensen Huang said "demand is accelerating" and noted that Vera Rubin is entering full production with partners.

Nvidia also guided third-quarter revenue in the range of $105.84 billion to $110.16 billion and said it had $99 billion remaining in its share repurchase authorization at quarter-end.

The company remains central to the AI investment narrative, but with rising growth expectations, intensifying competition, and market demands for clearer returns on massive AI spending, experts are divided on how much upside investors should expect.

Moorhead Says Nvidia Remains the AI Bellwether

Patrick Moorhead, CEO and chief analyst at Moor Insights & Strategy, told CNBC that Nvidia remains the AI bellwether because the number of software companies using its GPUs far exceeds those using competing platforms.

He noted that Nvidia delivered four beats and 126% revenue growth but fell short of some buy-side internal expectations. Investors have also become accustomed to unusually large beats, making it less likely that strong results will trigger the same stock reaction as before.

Moorhead expects large hyperscale cloud providers and major AI model developers to develop in-house chips, but he believes rapidly expanding AI demand makes it difficult for competitors to capture enough share in the near term to materially impact Nvidia.

He also highlighted Nvidia's ability to secure high-bandwidth memory ahead of competitors, while pointing to robotics and industrial IoT as longer-term AI growth opportunities.

Meeks Sees No Material Slowdown Before 2028

Paul Meeks, technology research director at Freedom Capital Markets, told CNBC he remains very bullish on Nvidia and the broader AI ecosystem. He does not expect a material slowdown before 2028 or later.

Meeks said Nvidia's results and guidance continue to push back against concerns that massive GPU and AI infrastructure investments will fail to generate sufficient returns.

He also highlighted Nvidia's valuation, noting the stock currently trades at a price-to-earnings ratio of roughly 16 to 17 times, below the overall S&P 500 multiple and about half of AMD's multiple.

Meeks believes stronger evidence that companies can monetize AI investments could unlock further upside. He also sees low counterparty risk in Nvidia's financing arrangements, given that financially strong hyperscalers have driven roughly 90% of AI infrastructure spending to date.

Hickey Says Nvidia's High-Growth Stock Phase May Be Over

Paul Hickey, co-founder of Bespoke Investment Group, takes a more cautious view on Nvidia's stock outlook.

Hickey told CNBC that Nvidia's massive scale ensures it will remain important to the overall market, but high investor attention makes it increasingly difficult for the company to deliver surprises large enough to drive significant share price gains.

He also noted that over the past three months, Nvidia's correlation with the SOXX semiconductor ETF has been essentially zero, even as the stock continues to outperform weaker semiconductor names.

Hickey believes Nvidia's high-growth stock phase has likely passed. However, he still views the overall market as being in an AI bull market and says AI stocks will ultimately need to regain leadership for the bull run to continue.

Major ETF Holdings

Sapient Quality Select ETF: Weight 9.60%

Franklin Focused Dynamic Growth ETF: Weight 9.73%

First Trust Innovation Leaders ETF: Weight 9.79%

Importance: Given NVDA's extremely high weight in these funds, any significant inflows or outflows into these ETFs could force automatic buying or selling of the stock.

Price Action

NVDA share movement: Pre-market trading data on Thursday showed Nvidia shares up 7.41% at $225.19.