Nvidia was left out of the latest chip rally sparked by Meta Platforms' Muse agent. It's a sign that the market isn't seeing the chip maker's move into selling stand-alone central-processing units as much of a winner for the stock.
Nvidia shares were down 0.4% in premarket trading Tuesday, having risen 2.3% the previous day. By comparison, Advanced Micro Devices surged 10% on Monday on the prospect that increasing use of Meta's Muse will boost demand for central-processing units.
AMD has gained 187% this year so far coming into Tuesday's session, compared with Nvidia's 22% rise. AMD trades at a forward price-to-earnings ratio of 45 times according to FactSet, while Nvidia trades at a forward multiple of 17.
It's hard for a company worth around $5.5 trillion to convince the market that it has the same growth prospects as a company worth less than a fifth of that, especially as the AI chip market broadens from Nvidia's traditional strength of training to inference-the process of running AI models.
It's not that Nvidia hasn't tried. During the company's first-quarter earnings call, CEO Jensen Huang said the company's CPU chips would bring in $20 billion this year. But shareholders seem skeptical it will move the needle for a company forecast to generate around $409 billion in revenue in its current fiscal year.
But Nvidia still has cards to play. The biggest is the deployment of tech from inference-chip specialist Groq-Nvidia paid $20 billion last year to license its technology. The company said in August that the Groq 3 LPX-an AI inference accelerator-was in full production and that independent benchmarking showed it powered leading speeds for AI coding and other workloads.
Investors are still waiting to see what the demand is like for the Groq-powered hardware, but if Meta's Muse and other AI agents massively boost the need for inference, then Nvidia should benefit along with its peers.
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