Nvidia closes at new high, but watch for these 3 AI warnings
Shares of Nvidia (NVDA) closed at a new record high on Monday. Wall Street is bullish on the stock, including Constellation Research's Ray Wang, who told Yahoo Finance that "Nvidia is leading the way" when it comes to AI and that the company still has "a long way to go" along with a good amount of time before competitors can catch up.
But Yahoo Finance Executive Editor Brian Sozzi makes the case that there are some red flags for AI stocks ahead. Watch the video above to hear Sozzi's three potential warning signs from companies like HP Inc. (HPQ) and Salesforce (CRM).
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 Stephanie Mikulich
Video Transcript
JOSH LIPTON: Nvidia here closing at another record high in today's trade. Let's put just some numbers on what has been a remarkable rally. It is up about 75% already this year. It's added more than $800 billion in value. That means it is now only trailing Apple and Microsoft in market cap.
The Street here not worried at all about the kind of move we've seen. Still in love with this name, nearly 90% still have a buy on it right now. No sales, not a single one on Nvidia. Investors love this company's last earnings report, Julie, and the bet, clearly, that it's just incredible sales growth. They're betting is going to continue.
JULIE HYMAN: And we just talked to Ray Wang. He loves the stock, too. In fact, I don't think that we have talked to anyone in the past few weeks who have said they don't like Nvidia, have we?
JOSH LIPTON: I'm not sure-- I'm not sure we found who's even neutral on the sidelines at this point. And in part, I think-- you know, you mentioned Ray, I think he makes a case that we've heard a lot, at least from the bulls, which is we talk about competition. And Ray's point is, yes, I mean, obviously, you see a move like that, it brings in the competition, AMD and Intel and even Nvidia's own customers.
JULIE HYMAN: And in-house chips--
JOSH LIPTON: Yeah, for the big cloud giants. But at least Ray making the case, pounding the table, Nvidia is just too far ahead at this point.
JULIE HYMAN: There's a lot of table pounding.
JOSH LIPTON: A lot. A tremendous amount of pounding, yeah.
JULIE HYMAN: All right. Joining us now with this key takeaways from the trading day, Yahoo Finance Executive Editor Brian Sozzi.
BRIAN SOUZZI: I'm pounding the table on market domination. There we go, guys. I really-- look, I totally hear what you were saying on Ray Wang. I mean, super knowledgeable guy, very much enjoyed listening to him in the green room. But I think he came away-- or I came in with the sense of I'm an investor on this platform. And Nvidia is going to go up every single day.
Nvidia, it took about 180 trading days for Nvidia to go from a $1 trillion market cap to $2 trillion market cap. News like, none of that is normal. And not-- every single day, you're going to see Nvidia rise about 6% like we're seeing on today's session. And that is my theme for this segment here.
There have been a couple of warning signs on this AI trade, said nobody gives a damn and nobody wants to talk about it. So that's why I'm highlighting it. HPE out earnings last week, the stock was hammered. Sales down 14%. They were warning about people being unable to install their AI infrastructure.
Where's the power? Where is the energy? All this stuff is overheating. How do you install this stuff on the premise and make a lot of money for warnings flag? Number two, HP-- that's HP Inc, they sell PCs, unwilling to bake in to their back half of the year outlook of what AI PCs could mean to their top line. They didn't come out-- they didn't come out and say, we're thinking we're going to see an explosion in PCs. Why? Because nobody knows.
And then last but not least, this week, I would keep a careful eye on Salesforce. They have a product demo day where they're supposed to unveil a lot of AI. But when they talked about this, guys, on their earnings call last week, everybody shrugged it off. Maybe the market didn't want to hear about any more AI tools from Salesforce or they were unwilling to bake in a profit expectation from new AI tools.
Whatever the case there are red flags out there. AI stocks do not go up every single day. So I hear what Ray Wang was saying. Appreciate him coming on our big show launch, but there are things that concerns investors need to be watching here.
JOSH LIPTON: Could you say, though, Brian Sozzi-- and you're making a very good point. You got to stay nimble. Let me get this, though, could you say, if I was going to channel my inner AI bulls, I would say, OK, you're pulling out HPE and Mr. Benioff. I could look at Mr. Dell, who somewhere in Texas probably is smiling really broadly.
BRIAN SOUZZI: They're selling PCs. I don't even know Dell still made--
JOSH LIPTON: But-- but this was the-- I mean, they not only beat and they gave you that guidance, which easily beat consensus. And in part, that was positive AI trends.
BRIAN SOUZZI: It was. Look, it's going to take time, I think, for a lot of this AI infrastructure to be built out. This notion that you can come out here and you can grow your backlog and these stocks are going up a straight line like they did last year. I think they're starting to be some real concerns on if that is going to happen. That is what I'm saying this week.
Now I think one of the real tells on this move is if Salesforce comes out this week, Josh, and it outlines a host of new AI tools and reveals some pricing, which when they reveal pricing last year for the AI tools-- it sent the stock higher. If they come out with these things in the market yawns, I think that is a big, big red flag to the AI trade.
And then really I think you have to watch what the Fed says this week, too. If they don't give an indication on what they may do with rates this year, if they agree with what Torsten Slok over at Apollo, which is our parent company, if they--
JOSH LIPTON: No cuts.
BRIAN SOUZZI: No cuts. They're not going to blow up the AI trade.
JULIE HYMAN: They're not going to do that.
BRIAN SOUZZI: They could at least signal one word could blow up this AI trade, it's Jerome Powell.
JULIE HYMAN: They're not going to signal that they're not cutting rates this year.
BRIAN SOUZZI: Well, if they do, that AI trade goes up in smoke.
JULIE HYMAN: Yes. And if I--
BRIAN SOUZZI: But if there's one rate hike, if there's one rate cut, I think that would blow up the AI trade. I think a large part that is fueling this AI trade is the fact that we might get two or three rate cuts this year. But if that doesn't happen, this trade can go up completely in smoke.
