Nvidia’s (NVDA) AI Surge Drives Financial Growth and Market Optimism

Despite a general slowdown in S&P 500 profits, Nvidia’s AI-driven financial growth gives the market more hope.

Investors are very interested in how companies in the S&P 500 index are making money from their AI investments as a new earnings season starts. Analysts think that profit growth will slow down. Companies in the S&P 500 are expected to report a 5.3% year-over-year profit increase, which is less than the 13.2% rise seen in the previous quarter. The industries that are expected to grow the most from one year to the next are technology and communication services. The tech sector is expected to make 15.4% more money, and the communication services sector is expected to make 12.3% more money.

Companies working with AI have been the best producers since the beginning of the year, largely responsible for market growth. The S&P 500 is at an all-time high right now, having gone up about 21% this year. This is mostly because the technology and communication sectors have done so well.

Howard Chan, CEO of Kurv Investment Management, said that experts are excited to see how big companies make money off of their AI projects, which could bring in a lot of money. For example, Meta (META) saw a rise in its stock price after strong sales growth predictions. This shows that its digital advertising revenue is effectively funding AI investments. Google, on the other hand, is being questioned about how to fit spending on AI into its current business plan.

That’s more than the long-term average of 15.7 times, as the forward P/E ratio for the S&P 500 is 22.3 times over the next 12 months. A lot of investors are hoping that the higher stock prices will be worth it after this quarter’s reports. Solita Marcelli of UBS Global Wealth Management is still positive. She says that earnings in the third quarter could help the market go up even more, especially since semiconductors are still a big area of investment in AI.

Nvidia (NVDA, Financial) is now the best stock to buy in because it is doing so well in the AI boom. Its stock price has gone up more than 170% this year, and it still has room to go up even more. In September, Bain & Company said that the market for AI devices and software could grow by 40% to 55% over the next three years. 3 million units will be bought of Nvidia’s next-generation GPU GB200 by 2026, compared to 1.5 million units bought of its 2023 H100.

After a three-day tour with Nvidia’s leaders that didn’t lead to a deal, Morgan Stanley rates the company as Overweight and sets a target price of $150. Their results show that there is a lot of room for progress in accelerated computing, and that management signals point to the start of a long-term AI investment cycle. A study named the Blackwell system NVL36/72 as the best way to handle computation-heavy inference interactions. Blackwell’s capacity is now ramping up as planned, and the next 12 months’ capacity has already been sold out, which shows that the company is still strong.

Analysts at Bernstein say that Nvidia’s biggest task now is to stay profitable after its rapid growth, but they say that now is not the time to worry. Melius Research keeps its Buy rating and sets a price goal of $165, citing plans to make more Blackwell chips in Q4.