AI hype 'doesn't feel anything' like a bubble: Strategist

Nvidia CEO Jensen Huang (NVDA) unveiled a new AI GPU chip called "Blackwell", which is expected to ship out later this year. Huang also announced a new partnership with Synopsys (SNPS). The announcement was made during the annual Nvidia GTC event.

Synovus Trust Senior Portfolio Manager Daniel Morgan joins Yahoo Finance to discuss the announcement, the conference, and how other AI chip makers are performing, giving insight into what investors should pay attention to.

Morgan relays why he believes Nvidia and other AI stocks are not like the internet bubble from the past: "It doesn't feel anything like that today. You have companies that... obviously have very good earnings. They're doing very well. They have very established businesses. Lots of cash on the balance sheet. I don't feel we're in an AI-dot com bubble at this point. I think we're at the beginning of something big. There are going to be companies that are not going to benefit from it as much as everybody thinks they are. But I think Nvidia is one that is going to benefit and, obviously, that will show up in the stock price. "

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

JENSEN HUANG: Synopsys is Nvidia's literally first software partner. They were there in the very first day of our company. Synopsys revolutionized the chip industry with high-level design. We are going to CUDA accelerate Synopsys. We're accelerating computational lithography. One of the most important applications that nobody's ever known about in order to make chips, we have to push lithography to the limit.

MADISON MILLS: That was Nvidia founder and CEO Jensen Huang moments ago. He announced software partnerships just before unveiling a new GPU chip called Blackwell at the GTC event. Joining us now is Synovus Trust Senior Portfolio Manager Dan Morgan. Dan, thank you for being here to react to some of this news. What do you think the investor reaction should be right off the bat to the news about the Blackwell chips introduction here?

DANIEL MORGAN: Well, I was actually watching the telecast like you were earlier before I came on the camera. And I think everything so far has gone very positive. It's pretty much in line with expectations, Madison. Thought process coming into this, where they were going to introduce a new line of chips called Blackwell, they also mentioned the Grace Blackwell 200, which is more advanced chip. They have a whole new family of chips coming out.

He also talked about the superior technology in this existing chip over the current Hopper 100, which is the H100. So it kind of leads you to believe that this is something that's going to replace the current chip that's out there right now.

So I think what we have to gather from this, Madison and Josh, is that we've had a lot of announcements recently from a lot of different companies about new chips, AI chips that they have coming out. And I think what we're seeing is Nvidia kind of punching back with their new and greatest technology. You have to bear in mind, they have about 70% market share. So these are the guys that are playing catch up.

And so they want to show they're not just going to sit back and let other companies like AMD and so forth come out with chips and not respond back. So that's what I think this is a big part of. And I expect them to continue to maintain that pole position right now.

JOSH LIPTON: How much-- Dan, you look at this stock and just what a remarkable rally it's been, Dan. It's up about 80% already just this year. How much good news do you think we're pricing in here?

DANIEL MORGAN: Well, there is a lot of good news, Josh, and the stock trades at a very high multiple. Obviously, when you look at the trail, if you look at it versus upcoming fiscal year '25, it's not a huge multiple. But at this point-- you know, I wrote a piece, who's going to be the first one to $3 trillion? Is it going to be Apple, Am-- or excuse me, Amazon or Google or Nvidia? And I think you'd have to say right now, Nvidia is in the better position just from a growth perspective.

So even though I expect the comparisons to slow down a little bit in terms of what they have been over the last four quarters, I still expect them to grow at a very strong rate. So, you know, Josh, when you've got a great stock like Nvidia, just got to let it run. Everybody wants to find that sell point and get out and find that perfect moment. But I still think you've got a ways to go.

JOSH LIPTON: So let me ask you, Dan, because some folks have-- I'm sure you've heard this, they look at the run Nvidia has had and other just AI-related names, the surge, Dan. And you've heard this reaction that it's a kind of classic stock bubble. Do you believe that, Dan? What's your response when you hear that?

DANIEL MORGAN: Well, I don't believe that, Josh, because if we look at Nvidia, it's a company that we can actually see tangible evidence that AI is directly impacting profits. And there are a few other companies that we can say that about. Like today, we had the announcement with Apple and Alphabet and the Gemini AI engine. And so it's a great announcement. It sounds really good. But how are we going to parse through that? Where are we going to see actual financial results?

If you think about, Josh, I've been in this business since '87, so I went through the tech bubble back in late 1999, 2000, summer of 2000. And it doesn't feel anything like that today, because you have companies that are obviously have very good earnings. They're doing very well. They have very established businesses, lots of cash on the balance sheet.

So I don't feel we're in dotcom or IA dotcom bubble at this point. I think we're at the beginning of something big. And there are going to be companies that aren't going to benefit from it as much as everybody thinks they are. But I think Nvidia is one that is going to benefit. And obviously, that will show up in the stock price.

MADISON MILLS: Well, talk to me about what stocks we can anticipate rising off of this news throughout the course of this week. We're seeing Synopsys up unsurprisingly a little over 3% here on. Nvidia, though, a little bit flat, which is a little surprising to me here. I'm curious what stocks are audience of investors on the Yahoo Finance platform should be looking at throughout the rest of the week to suss out how this news is landing?

DANIEL MORGAN: Well, Madison, obviously, you're going to get a boost to AMD. We know that they have the Mi300S, Mi300X, that's their latest AI chips that they recently brought out. Also, a lot of people want to talk about Intel, but they have the Gaudi 3, which is actually going to be rolling out pretty soon. They have Falcon Shores. So they have some chips coming down the pipe.

You have Marvell, obviously, with their PAM DSP 4 chip. That's obviously going to-- should benefit from this. We know that Broadcom reported a couple of weeks ago. And they don't have a pure play chip, but they do have accelerators and other products that are AI-related. So those would be some of the chip players that I would expect to really benefit from the Nvidia news coming out, kind of names that we know about.

And then, you know, Madison and Josh, we switch it over and we look at companies that are currently developing their own chips, you don't really think of Alphabet, but they have the Tensor chip with they're developing with Broadcom. So you have a lot of these companies that are buyers of chips, AI chips, that are in the process of developing their own chip. Meta, for example, has two chips they just released a couple months ago that they're developing in the AI space that they would use as an alternative to, let's say, the H100 for Nvidia.

So you have kind of a force of the chip competitors. And then you have companies that use the chips that are developing their own AI chips. That should benefit from what's happening with Nvidia. So it's kind of a two-pronged attack.

JOSH LIPTON: Dan, always love having you on the show. Thanks as always for your time and insights.

DANIEL MORGAN: Thanks, Josh.