NVIDIA Bounces Back from DeepMind Shock Amid Growing Anticipation for Q4 Earnings and GTC

Investors Eye NVIDIA's Performance Following Major Tech Investments

NVIDIA's stock has nearly recovered from the fallout of the shock delivered by Chinese AI startup DeepMind. As of February 18, NVIDIA shares closed at $139.40, reflecting a modest increase of 0.4%. This price is almost back to the pre-DeepMind level of $142, highlighting a strong recovery.

The downturn in NVIDIA's stock occurred after DeepMind unveiled a cost-effective AI model on January 27, leading to concerns that NVIDIA's expensive chips might not be necessary to the same extent. The announcement caused NVIDIA's stock to plummet by 17%, wiping out approximately $600 billion in market capitalization in a single day. However, in just about three weeks, NVIDIA has managed to rebound close to its previous stock price.

This resurgence can be attributed to significant announcements from four major tech companies—Microsoft, Alphabet, Amazon, and Meta Platforms—during their earnings reports last month, where they revealed a combined $320 billion in capital expenditure plans for the year. The ongoing unveiling of new AI investments has also positively influenced NVIDIA's stock.

Recently, the European Commission announced its intention to invest €200 billion in AI infrastructure, which includes €20 billion earmarked for AI gigafactories, during the AI Action Summit held in Paris. Additionally, the French government announced private investments totaling €109 billion in AI infrastructure and deployment. According to Vivek Arya, an analyst at Bank of America Securities, these developments indicate that "there are no identified risks in optimizing AI models related to DeepMind in the short to medium term."

Arya maintained a "buy" rating on NVIDIA, setting a target price of $190, which suggests a potential upside of 36% from its current stock price. Furthermore, the South Korean government plans to procure 10,000 AI chips this year and an additional 8,000 of NVIDIA's H100 and H200 chips by the first half of next year, serving as another catalyst for NVIDIA's stock price.

Matt Britzman, an analyst at Hargreaves Lansdown, noted that the demand for NVIDIA's AI chips extends significantly beyond major U.S. tech companies. He pointed out that the Stargate project has garnered substantial attention as various countries express their intent to establish their own computing clusters, indicating a robust and emerging market for NVIDIA's chips.

However, there is concern that demand may shift toward NVIDIA's next-generation Blackwell chips, potentially leading to a decrease in prices for the H100 models. Nevertheless, research conducted by UBS analyst Timothy Arcuri revealed that the prices of H100 chips have remained stable thus far. He indicated that "the high pricing of cloud GPUs signals strong demand," suggesting that it would not be surprising for the prices of the Hopper series to remain resilient, given the prevailing demand environment. Arcuri also has a "buy" rating on NVIDIA, with a target price of $185.

NVIDIA is set to report its Q4 earnings for the 2025 fiscal year on February 26. Bank of America anticipates that NVIDIA's Q4 results will slightly exceed market consensus but warns that revenue guidance for the first quarter of the 2026 fiscal year may be somewhat disappointing. Factors contributing to this outlook include the transition to Blackwell chips, the potential decline in Hopper chip prices, and regulatory headwinds regarding U.S. exports to China.

As a result, Bank of America expects NVIDIA's stock to experience volatility following the earnings announcement. However, the anticipation surrounding the next-generation Blackwell chips is likely to create positive momentum in the short term. They emphasize that NVIDIA occupies a unique position as a computing platform company rather than just a semiconductor manufacturer, maintaining it as their top pick in the semiconductor sector. They also commend NVIDIA's ability to integrate hardware and software optimizations in the rapidly evolving AI market.

Additionally, NVIDIA's current stock valuation remains attractive, with a price-to-earnings ratio (PER) of 31 and 24 based on projected earnings for fiscal years 2025 and 2026, respectively, which is at the lower end of its historical PER range of 25 to 56.

Another significant event that could act as a catalyst for NVIDIA's stock is the upcoming GTC (GPU Technology Conference) scheduled for March 17. At this conference, NVIDIA is expected to unveil the Blackwell-based GB300 and the subsequent Rubin chip architecture, while also exploring market opportunities in robotics and quantum computing.

After experiencing staggering increases of 239% in 2023 and 171% in 2024, NVIDIA's stock has risen 3.8% so far this year, slightly trailing the S&P 500's 4.2% increase.

In related news, the FOMC minutes from the January meeting will be released on February 18 at 2 PM (local time), providing insights into recent inflation trends and the potential impact of Donald Trump's tariff policies on inflation and the economy, as well as the Federal Reserve's future interest rate trajectory. Meanwhile, Arista Networks, a data center networking company, reported quarterly earnings and revenues that exceeded analysts' expectations on February 17; however, its stock fell 4.8% in after-hours trading.