Nvidia will hold the 2024 GTC Conference from March 18th to 21st, releasing the latest breakthrough achievements in the fields of accelerated computing, generative AI, and humanoid robots. This meeting is the first time in five years that the GTC conference has returned offline. Nvidia CEO Huang Renxun will give a speech on the theme of "1 # AI Conference for Developers".
However, prior to the conference, Nvidia's stock had recently become one of the most shorted stocks, with volatility doubling to the beginning of the year, recording the highest among the Magnificent Seven in the US stock market. But the market expects that the GTC conference will end the recent turmoil and help Nvidia start a new round of gains.
Short selling scale surpasses Tesla
After the huge success of the H100 chip, Nvidia's stock price has been steadily rising since last year, making it the best performing stock in the S&P 500 index. But since hitting a record closing price on March 7th this year, Nvidia's stock price has been volatile: last Tuesday, it ended its worst two-day decline in nearly five months, but began to decline again on Wednesday. From the historical high of $974 on March 8th to the close of $878.36 last Friday, the decline was 9.8%.
According to the latest data from S3 Partners, Nvidia's stock recently ranked third in short selling, with a short selling size of approximately $18.3 billion, second only to Microsoft's $20.17 billion and Apple's $18.72 billion. Bears are even more interested in Nvidia than Tesla (TSLA), with Tesla's short selling volume of $17.01 billion during the same period. The continuous short selling for a period of time has led to Tesla's decline of over 30% from the beginning of the year to the present.
However, the huge short selling of Nvidia remains unprofitable to this day. According to media data, as of last month, investors who shorted Nvidia suffered a total loss of nearly $7 billion. Nevertheless, they are still increasing their bets on Nvidia's decline.
At the same time as bearish positions increased, the volatility of Nvidia's stock also increased significantly. According to AlphaQuery data, Nvidia's implied volatility for the next month is 0.6392, more than twice the level at the beginning of the year. During the same period, the CBOE VIX index, which measures the volatility of various options on the S&P 500 index over the next month, only rose 7.75%. Nvidia's implied volatility ranks first among the "Big Seven", three times that of Microsoft and Apple, and over 34% higher than Tesla.
Stacy Rasgon, an analyst at investment bank Bernstein, said of Nvidia's recent financial performance, "The most worrying thing is that the current base has become so large and risen so quickly, which worries the market that this trend cannot be sustained." However, he added that this week's GTC conference will be the next key event, "The more new products Nvidia launches, the higher their performance and price, the more they will have in the future."
GTC conference may start a new round of upward momentum
Overall, Wall Street is extremely optimistic about Nvidia's current GTC, and it is expected that this conference will help Nvidia's stock end its recent volatile trend. In media surveys of analysts, Nvidia received 60 buy ratings, 7 hold ratings, and 0 sell ratings. Despite recent declines, Nvidia's stock has still risen by 77.4% year to date, with a 238% increase for the entire year last year.
For the upcoming GTC conference, there are currently three focal points in the market: the next-generation Blackwell GPU architecture, the new B100 GPU based on Blackwell, and the progress of humanoid robots. Nvidia's progress in software has also received attention. The market expects that Nvidia may also make significant updates to its software called CUDA, which provides developers with tools to run AI programs on their chips and helps them stay in touch with Nvidia's chips. CUDA will also make it more difficult for Nvidia users to turn to components sold by its competitors, such as Advanced Mirco Devices, internal chips from Microsoft and Alphabet's Google.
In addition, Nvidia began providing its chips and software as cloud services to developers last year, and analysts are also paying attention to how Nvidia will expand this effort in the future. "The server is actually more of a software game," said Ryan Trout, an analyst at chip analysis company Trout Research. Analysts will closely observe whether other cloud services and software companies "will feel nervous about Nvidia coming to their playground to play together.".
Chen Dalong, a former US stock trader and current quantitative fund operator at Castle Hedge Fund, told First Financial reporters, "This conference will undoubtedly highlight AI. What I want to see is the real application of AI in various industries. These applications not only showcase the prospects of AI, but also demonstrate the practical benefits at the application level. These specific examples will help to transform AI from an irrational optimism (hopium)." Emotions are transformed into tools and applications that can effectively improve productivity, save costs, and bring other benefits This more down-to-earth feeling, he said, can in turn drive more applications of AI and help Nvidia increase the capacity level of its data centers and other digital infrastructure, thereby stimulating additional capital expenditures and converting them into greater profit margins.
Bank of America raised Nvidia's target price from $925 to $1100 last week. In the view of Vivek Arya, an analyst at the bank, the next short-term factor driving Nvidia's rise is the GTC conference. He said, "We expect the outcomes covered by this conference to include: showcasing the increasing impact of generative AI in the terminal market and its wider application; having the opportunity to rebuild a global computing infrastructure of $1-2 trillion through its accelerator, forming an annual market of $250-500 billion in the next 3-5 years (previously $250 billion per year);"; "Report the latest progress made in areas such as B100 GPU, flagship GPU N100, Ethernet switches, next-generation chip DPU, and cutting-edge AI solutions."
Fundamentally, Anya stated that although Nvidia's market value has exceeded 2 trillion yuan, there is still room for growth in both stock valuation and market holdings. Specifically, he stated that Nvidia's current forward P/E ratio is 37 times, and when ChatGPT was launched in 2022, its forward P/E ratio was 44 times, which is still within its historical range of 26 to 69 times. Therefore, the current valuation is still attractive. Meanwhile, compared to its weight in the S&P 500 index, investors still hold it relatively low. "Although Nvidia holds a 67% stake in the funds we surveyed, its relative weight (i.e. the ratio of its stake to the weight of the S&P 500 index) is 1.01 times, lower than the average level of 1.13 times for other large technology stocks, and its growth potential is nearly 9 times higher than the average level of these other large technology stocks," he said.
He also added, "AI technology will be applied in various fields such as cybersecurity, academic research, and climate initiatives in various countries in the future. The upward price target also reflects Nvidia's expanding target market in the AI field."