During Tesla’s second-quarter conference call, CEO Elon Musk revealed that the company heavily relies on Nvidia hardware for its self-driving software. Musk expressed his admiration for Nvidia CEO Jensen Huang and commended the company’s impressive achievements. He further mentioned that if Nvidia could supply them with enough graphics-processing units (GPUs), Tesla might not even need its Dojo computing platform. However, due to the high demand from numerous customers, this remains a challenge for Nvidia.
Tesla’s Dojo computing platform, combined with Nvidia hardware, plays a vital role in training the vehicles to drive autonomously. Musk emphasized the need for advanced training resources and projected that Tesla may achieve an in-house neural net training capability of 100 exoflops by the end of next year. An exaflop represents an immense computing power that enables complex tasks like autonomous driving and automated essay writing.
Although Musk’s positive comments about Nvidia should have a bullish impact on the stock, it appears that the market has not responded accordingly. As of early trading on Thursday, Nvidia shares are down approximately 1.2%, while the S&P 500 and Nasdaq Composite remain relatively stable with slight fluctuations of -0.1% and +0.5%, respectively.
Musk’s Comments Boost Nvidia Stock
Nvidia, the leading provider of AI computing solutions, has seen a remarkable surge in its stock value. Since their blowout first quarter report, which revealed a significant increase in demand for AI computing, Nvidia stock has soared by more than 50%.
What’s interesting is that Tesla stock has also experienced a similar rise, coinciding with Nvidia’s quarterly report. While Tesla’s success can be attributed to various factors such as record deliveries and new partnerships with auto manufacturers, it is worth noting that Tesla has established itself as a key player in the AI industry. During their second-quarter earnings call, discussions revolved around Tesla’s advancements in self-driving technology, AI capabilities, and their revolutionary Dojo project.
As we look ahead, Nvidia is expected to release their fiscal-second-quarter earnings in late August. Industry analyst Christopher Rolland from Susquehanna anticipates another impressive performance from Nvidia, driven by the increasing demand for hardware, networking, and AI systems. Rolland predicts that Nvidia’s earnings per share will be $2.10, slightly higher than Wall Street’s estimate of $2.07. Additionally, he envisions that Nvidia’s earnings per share for fiscal 2025 could reach up to $15, whereas Wall Street models it at $11.20 per share. With these optimistic projections in mind, Rolland gives Nvidia stock a Buy rating and sets a price target of $575.
If Nvidia achieves an earnings per share of $15 by fiscal 2025, the company’s stock will be valued at approximately 31 times the estimated earnings for calendar year 2024. In comparison, Tesla stock currently trades at about 59 times the estimated 2024 earnings. Intel stock (INTC), on the other hand, trades at 20 times calendar 2024 earnings, while General Motors (GM) stock trades at six times. It is noteworthy that the S&P 500 index trades at around 18 times the estimated 2024 earnings.
In conclusion, while Elon Musk’s remarks about Nvidia are encouraging, it is evident that the company has already gained substantial momentum in the market. As the competition for AI solutions intensifies, Nvidia continues to be at the forefront of innovation, positioning itself for continued growth and success.