Bull case for Nvidia remains strong, says Cantor Fitzgerald's CJ Muse

Yes, it’s NVIDIA that Stanley Druckenmiller is trimming his position in. And as Altimeters Brad Gerstner points out, it’s one of the handful of tech stocks that saw big gains last year. But shares are currently 7% below their 52 week high. And while NVIDIA has firmly held the lead in the AI arms race, there’s a lot of new players emerging. Microsoft announced today, with Biden in attendance by the way, that they would invest $3 billion to build AI out in Wisconsin. Apple debuted 2 new iPads that will back AI programs. And once under the radar, Supermicro became a near $50 billion company thanks to its strong sales of its AI powered servers. But even as the competition heats up, my next guest says Nvidia’s mode is still so big and it’s only going to get bigger over the next decade. He’s got a buy rating on the stock $1200 price target. I think he’s had it since 20. He’s got 33% more upside from here. Let’s bring in CJ Muse. He’s a senior managing director at Cantor Fitzgerald covering the semi space. CJ, welcome. A pleasure to chat with you. Did I get that right about your bullishness all along the way here? Yeah, you did. Thank you. Thank you, Kelly, for having me. So what did you identify way back when that about Nvidia’s potential that makes you still so bullish on its upside now? Yeah, I, I, I can’t say way back then that I, I saw this coming. But you know, as we sit here today, you know, I think that Jensen and crew, you know, have really created both the hardware and software and complete solution that has put them in the pole position and you know they’re moving to an annual cadence for new offerings will only enhance their competitive advantage. I love to hear the skepticism. I love that there’s great debate that they might have an air pocket before the launch of of their new, you know, black hole solution. And you know quite frankly, I think that that therein lies the opportunity. You know, I think there is a worry that you know, there could be this potential for an air pocket and you know, we don’t see that at all. We’ve definitely seen lead times pull back in the sense that you can now actually, you know, fine GPUs, but in no way does that mean that we’re in excess supply. And and I think that, you know, whether it’s hyperscalers, enterprise and sovereigns, I think that they’re going to drive excellent demand for for AI. You know, well you know, into 25 and 26, yeah, it’s you’re not ruling out a pullback, but you’re basically saying people should jump in with both hands. Let’s talk brass tacks if we could and talk about the PE multiple, the earnings potential that you see over the remainder of this year maybe into next year. Sure. You know, I think that for next year the streets at $30, you know we’ve been talking about $35 plus. I think the buy side is, is is underwriting a 35 to 40 type number. And if that’s the case, then I think we easily get to our price target and and you know I think that that will be the case. What about people who look back and I’m going to take this outside of the the realm of of kind of people in the semiconductor space, but traders and investors more broadly and they go, well, we saw Tesla when it was a trillion dollars wasn’t a great time to buy it then sure, I think that there there is a realistic kind of thought process in terms of you know how big can the market cap actually become. But you know if if the AI infrastructure market is truly going to grow into a $400 billion market and given the leadership that we expect NVIDIA will will continue to to to have, then you know the current market cap you know is conservative in in that world. And so if you believe in AI and and you believe in the investments that are required to support that which which we do you know their market cap can clearly push higher. How do you think about the different kind of macro factors here, what what the Fed does or doesn’t do with rates, you know, whatever kind of slowdown might happen with the economy this year. How should we think about NVIDIA kind of upside downside in those scenarios? Yeah, no, that’s a great question. You know, if I, if I had to think about what I learned this earnings season at a very high level, it’s really kind of you know, secular continuing to win whereas cyclical if anything down ticked over the last three months. So you know if you look at you know housing or you know some of the reports on the consumer front, you know clearly it’s pointing to a slowdown in the economy into the second-half of the year. And and and obviously you know that that is really I think the one risk for for owning NVIDIA. But you know that said I think the backdrop is for continued spending kind of irrespective of you know what the Fed does or or the consumer because AI is so mission critical to every Fortune 2000 company that they have to invest and and so I just don’t see the slowdown here. I think we can weather the storm in terms of you know NVIDIA, you know sales continuing to push higher and above consensus. And in that environment, you know if they’re truly going to do kind of $35, you know the multiple today at 25 times is is not you know aggressive at at all. And so I think you know in in any economic scenario NVIDIA will be a relative outperformer. It’s interesting how relatively low the multiple is compared with Tesla or even at Netflix at their peaks $1200 is your price target, you’re overweight. CJ, thanks for joining us today. We appreciate it. CJ Muse with Cantor Fitzgerald and.