- Nvidia is expected to have a strong quarter amid continued AI spending, says Wedbush.
- Tech firms are still early in AI hardware investments, driving demand for Nvidia's AI chips.
- Major customers like Foxconn and Supermicro report profits from AI, boosting Nvidia's outlook.
Nvidia is bound to report another strong quarter of earnings as the AI spending boom is in full swing, according to Wedbush Securities.
The investment firm — which has dubbed Nvidia founder Jensen Huang the "Godfather of AI" — said it's still bullish on the chipmaker ahead of its second-quarter earnings report on August 28. The $1 trillion "tidal wave" of AI spending that Wedbush has predicted previously is underway, with tech firms still in the early stages of investing in AI hardware, according to Matt Bryson, Wedbush's senior vice president of equity research.
"What's fueling it is there's still a ton of spending on the AI chips that Nvidia makes," Bryson said in an interview with CNBC on Monday, noting that the recent sell-off in Nvidia shares stemmed from concern that demand was waning for the company's AI chips, and that there could be issues with Blackwell, its next-generation GPU.
But some of Nvidia's largest customers have reported healthy profits, in part due to increased investment in AI. Foxconn, a major buyer of Nvidia's chips, saw its profits rise 6% over the last quarter, largely due to "strong growth momentum" stemming from its AI servers. Supermicro, another large Nvidia customer, also saw "great" sales and beat revenue estimates last quarter, despite missing on earnings, Bryson noted.
"Recovery has to do with a lot of recent data points suggesting that spending on AI just isn't slowing," he added.
AI being integrated into personal devices could also represent a major tailwind to the semiconductor industry, as it will fuel more demand for AI content, Bryson predicted.
Nvidia's delaying the release of its Blackwell chips also probably "doesn't matter" in the grand scheme, he added, assuming that the company is on track to roll out the chip from here on out.
"Everyone is committed to spending on AI through the Blackwell launch. So you got another year-plus of elevated AI spend," Bryson said. "I still have a 'buy' rating and I think that we get another quarter from Nvidia that, again, is another beat and raise. They've been doing it consistently. There just doesn't seem to be any change in momentum from their customer base."
Some analysts have grown skeptical of Nvidia's wild success, with the stock seeing a meteoric 3,021% increase over the past five years as more tech firms have rushed into the AI space.
Some analysts, though, have made the case that demand for Nvidia's chips is bound to wane. Some of Nvidia's largest customers, like Meta, Alphabet, and Amazon, are already working on their own chips or investing in other partners, according to one analyst who has predicted a long-term decline for the stock.