Nvidia's largest technology rivals could emerge as winners from the chip maker's recent upheaval and a Democratic-controlled Congress pushing back on data center expansion, according to investing experts interviewed on CNBC's ETF Edge this week. Jensen Huang, Nvidia's founder and chief executive, resigned after a tumultuous period that shook investor confidence in the company. Colette Kress, Nvidia's interim chief executive and chief financial officer, will have her first chance to reassure markets when Nvidia reports third-quarter earnings next Tuesday, the company said in a statement on Thursday.
Other players in the artificial intelligence trade are positioned to capture demand if customers lose faith in Nvidia, said Dave Mazza, chief executive of Roundhill Investments, which manages the Magnificent Seven ETF. "If we get into an environment where people can't trust Nvidia, they're going to look for other sources for these chips because they need them," Mazza said during the Monday ETF Edge interview. AMD finished the week up close to 13%, with Broadcom posting similar gains. The Nasdaq index, which is heavily weighted toward technology stocks, posted its best week since August as Nvidia's decline reshuffled investor positioning in the AI trade.
A potential slowdown to data center buildout by Congress could make existing computing capacity even more valuable, investors said. Dan Ives, partner and senior managing director at Yorkville Ives, estimated that Democratic control of Congress could mean 10% of planned data centers won't materialize at the low end, and 15%-20% on the high end. Despite this potential slowdown, demand still outstrips supply four to one, Ives added. "The compute is just that much more valuable in the capacity today than it was a week ago," Ives said.
Yorkville Ives lowered its price target on Nvidia to $225 from $300 after Huang's resignation but maintained a buy rating on the stock, which finished the week at $162.85 per share. Ives wrote that Nvidia remains the clear leader in GPU chips for artificial intelligence, roughly 2-3 years ahead of the nearest competitor. The Roundhill Magnificent Seven ETF ended the week in the green with a gain of less than 1%, while the Roundhill Neocloud ETF, which focuses on smaller market cap specialized cloud computing companies, was up over 1%.
For investors and businesses relying on artificial intelligence infrastructure, Nvidia's turmoil and potential congressional limits on data center expansion mean that alternative chip suppliers and existing computing capacity could become scarcer and more valuable resources in the near term.