These 3 obstacles lie ahead for Nvidia: Analyst

Nvidia (NVDA) executed a 10-for-1 stock split, with shares opening at around $120. TECHnalysis Research president and chief analyst Bob O'Donnell joins Morning Brief to break down the significance of the stock split and investor reactions.

"The beauty of a 10-for-1 split like this is that the average person who couldn't afford that Nvidia stock can obviously jump in," O'Donnell says.

While Nvidia has been a success story, he believes the road ahead isn't particularly smooth. O'Donnell says that the competition will heat up, with more companies willing to try alternatives to give them some leverage when working with Nvidia. He notes that with the company's sheer size, there may be some regulatory concerns. Finally, he explains that Nvidia will face a major challenge if generative AI changes and its chips are no longer needed.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Melanie Riehl

Video transcript

Nvidia on track to open the day, right around 100 and 20 bucks a share.

And you're not reading that incorrectly.

But the really point to what is happening or what happened after the bell on Friday that 10 for one stock split.

And that actually follows this dramatic rise that we've seen in the stock really since the start of the year and what we've seen over the last year and a half.

Now this move here adding to investor excitement surrounding A I A trade that really has not shown any signs of slowing down.

So what's ahead?

We wanna bring in Bob o'donnell here.

He's the President of Technos Research Bob Lot to talk to you about with NVIDIA and we'll get to Apple here in just a second.

But first talk to me about the significance of this and what you think the reaction is going to look like in the markets over the coming days.

Sure shaw, you know, I mean, look the beauty of a, of a 10 for one split like this is that the average person who couldn't afford that NVIDIA stock can obviously jump in and there's a lot of people who have been hearing about it.

You know, as Brian said five years ago, nobody heard NVIDIA.

I did but not a lot of people I never questioned you, Bob, never question you.

I knew you were, I knew you were all NVIDIA.

I knew I get it all good, Brian.

All good.

Uh Anyway, no, but look, obviously that opens up the, you know, a lot of opportunities for other people to jump into this A I play and, and you know, the reality is, look, they have positioned themselves incredibly well in video, not only do they have the chips, they have that software and that Ka software has become the magic glue that people are attaching themselves to, to allow companies, organizations big, you know, the all the big uh foundation model guys to use NVIDIA stuff to drive these new services.

Uh Interestingly, we'll see if Apple actually does that, that will be an interesting side discussion, but the bottom line is everybody else open A I and um uh IBM and all these other companies that are doing large foundation models and everything else.

It's all being run on NVIDIA and as individual companies start to do some of this work themselves, of course, some of them are starting to buy these devices.

So, um you know, the competition is heating up A MD has never had stronger offerings.

Intel is finally getting its Gowdy Three Act together to accelerate.

We've got a bunch of smaller companies, but it's going to take a while for these guys to catch up A MD, of course, is the one that's got the most opportunity in the near term.

But it's a tough road for these competitors against NVIDIA because they've cemented themselves in such a strong position.

Bob over the weekend, I was reading a really cool Evercore note and they are predicting more than $60 a share in earnings by 2030.

Now, if you go to Yahoo finance, click on NVIDIA, go to the stats page analyst, consensus shows about $27 a share this year.

I mean, almost a tripling in earnings through 2030.

Uh uh, is it crazy to think by 2030?

NVIDIA is by far the most valuable company in the world and it's about a 5 to $6 trillion market cap company.

Well, certainly if they, if things keep going in the way they are, that's absolutely within the realm of possibility.

But let's think about a couple of things.

Number one, as I started to mention, competition is getting much tougher and the truth is nobody likes especially in tech to have one company completely dominate the way that NVIDIA is right now.

So you're going to see a lot of companies being more willing to try alternatives just to give them some leverage when it comes to working and video, which of course they will continue to do.

Number two, anybody that's that big, you start to worry about regulatory concerns.

What are the issues around that that could pop up?

And then finally, and the biggest question is what if the way we start to do gen A I changes?

We've started to hear discussions Apple is going to talk about this later today, doing some of that stuff on the device that doesn't require the chips, these big foundation models driving this starting to shrink in size.

So therefore perhaps I need a little bit less compute.

These are the bigger tech questions, implementation questions that we have to watch long term.

They're not going to change overnight to be clear.

But those are the big picture questions that, you know, by 2030.

Certainly, I think are going to be a factor.