🔮 What Wall Street expects from Nvidia

Analysts are scrambling to increase their price targets for Nvidia ahead of its Q2 results, seemingly much more confident in the affirmation they’ll be getting on the longevity of the AI boom and Nvidia’s critical role in facilitating it. Usually they at least have the restraint until after Nvidia earnings blow them away. 

• Over the past month, the average price target for Nvidia among analysts polled by Bloomberg has increased by 7.7%, the fastest growth rate this year. 

• Even still, the chip designer arguably hasn’t gotten much credit for a recovery in its China business. Nvidia has talked a ton about the importance of accessing the Chinese AI market — especially after effectively getting locked out after export restrictions were enacted in mid-April.

• The company has since regained the ability to send its H20 chips to the world’s second-largest economy in exchange for sending 15% of revenues generated from those sales to the US government.

Already, those forgone sales have caused full-year revenues to be $10.5 billion lower than they otherwise would have, per Nvidia’s management, but it doesn’t seem like the company is benefiting vis-à-vis the Street’s view from this Chinese shift yet.

The Takeaway

“We believe Nvidia earnings on deck is another positive catalyst for tech stocks that will further remind investors this is still only the bottom of the 2nd inning in the 9 inning game around building out the AI Revolution over the coming years to enterprises/consumers globally,” Wedbush Securities analyst Dan Ives wrote. “We continue to believe from our Asia field checks that demand to supply is 10:1 for Nvidia’s golden chips.”

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The chorus of voices urging Apple to make a major AI acquisition to rectify its lagging position among its peers is getting louder, and it appears that Apple is at least listening.

• Apple executives have discussed acquiring either OpenAI rival Mistral AI (which has a $10 billion valuation) or AI-powered search engine Perplexity (with a $20 billion valuation), The Information reported — but they have yet to make a move.

• Despite being relatively early to the digital voice assistant game, Siri was not in fact the killer app of AI as originally hoped, with large language models actually appearing to be the kingmaker of the AI era. 

• Apple Intelligence, Cupertino’s homegrown effort, has had a bad time. Just last week, Apple’s stock popped on the news that it was potentially going to crawl on hands and knees to rival Google by using its Gemini AI to power Siri. 

The iPhone maker has a lot of reasons to hesitate (which The Information covers in depth), including a history of only small acquisitions, not wanting to overpay, and fears of culture clashes.

The Takeaway

When some of your most devoted analysts and stakeholders are practically begging to avoid having a “BlackBerry moment” in AI, the question becomes less “what is the correct valuation of an AI company to acquire” and more “how much money can Apple afford to shell out to silence doubters saying it’s about to miss the moment.” With $164 billion cash on hand as of March, the answer is probably lots.

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Thanks to the $7,500 tax credit expiring at the end of September, customers who want a new EV are rushing to Tesla dealerships to capitalize on it. In combination with the steep discounts Tesla is offering — it makes sense for the company to get ahead of the federal tax credit sunset, too — the automaker is, for the first time in a while, seeing demand for its vehicles outpace supply.

Where demand outstrips supply

• VF Corp. and Canada Goose climbed on Baird upgrades as fall shopping season kicks off

• Eli Lilly rose after reporting encouraging trial results for its next-generation weight-loss pill

• Chinese EV maker Nio accelerated after a JPMorgan upgrade to “overweight” from “neutral”

• Constellation Brands, parent company of Modelo, slipped after Bank of America analysts downgraded it