On Wednesday, September 11th, during the midday session of the U.S. stock market, CEO Huang Renxun's discussion with Goldman Sachs CEO Solomon at a technology conference organized by Goldman Sachs triggered a surge in the U.S. stock market. His comments on the "huge demand for AI chips" causing "tension between Nvidia and its customers" completely erased the intraday decline and led to a V-shaped rebound and rise in major stock indexes, with technology and chip stocks leading the way. $NVIDIA (NVDA.US)$ On Wednesday, September 11th, during the midday session of the U.S. stock market, CEO Huang Renxun's discussion with Goldman Sachs CEO Solomon at a technology conference organized by Goldman Sachs triggered a surge in the U.S. stock market. His comments on the "huge demand for AI chips" causing "tension between Nvidia and its customers" completely erased the intraday decline and led to a V-shaped rebound and rise in major stock indexes, with technology and chip stocks leading the way.

NVIDIA initially saw a slight decline in the early trading session of the US stock market, falling below $107, but as Jensen Huang spoke, the stock price steadily rose. By the end of the trading session, it continued to hit new daily highs, reaching a peak gain of 8.4% and briefly surpassing $117. The stock closed with an 8% gain, marking its largest six-week increase and recovering the majority of the decline since August 30th.

With the boost from NVIDIA's sharp rise, the S&P 500 index, which initially fell 1.6% in the market, reversed to a gain of over 1%. The Dow Jones Industrial Average, which initially fell nearly 744 points or 1.8%, turned around and rose 0.3%, reclaiming the psychological level above the 0.04 million mark. The Nasdaq Composite, which initially fell 1.4%, reversed to a gain of over 2%, with an intraday amplitude of over 630 points or 3.8%. The Russell 2000 small-cap index reversed from a decline of 1.8% to a gain of 0.3%, while the Nasdaq 100 reversed from a decline of 1.6% to a gain of 2.2%. The Philadelphia Semiconductor Index reversed from a decline of 1.4% to a sharp rise of nearly 5%.

Some analysts pointed out that this is the first time since October 2022, nearly two years ago, that the S&P 500 index and the Nasdaq 100 index have completely erased intraday losses of at least 1.5%. In other words, with the power of NVIDIA and Jensen Huang alone, they have managed to overcome the impact of the significant inflation data from the US CPI in August on the US stock market.

Zerohedge, the finance blog known for its acerbic commentary, said that after the US stocks collectively fell more than 1% and dropped to the low point after last Friday's non-farm data, the situation was once again saved by a remark from Huang Renxun: "In any case, what the market hears is 'strong demand'."

Wall Street News mentioned in a summary of Huang Renxun's speech on Wednesday, the most memorable sentence for him was that AI chip Blackwell is so popular that it has made customers dissatisfied, and Nvidia's products have become the hottest commodities in the technology industry, with customers competing for limited supply:

"Everyone is counting on us...the demand for our products is so great, everyone wants to be the first to get them, to get the largest share. We may have more emotional customers today, and that's understandable. The relationship is very tense, but we are doing our best."

He also mentioned:

"We bear the heavy burden of many people, everyone is counting on us. The demand is so great that the delivery of our components, technology, infrastructure, and software is really an exciting/emotional thing for people. Because it directly affects their income and competitiveness. You know, this situation is happening all over the world, everything is sold out. So the demand is simply incredible."

After the sharp decline last week, Huang Renxun's speech was seen as an opportunity to calm investor nervousness and answer the big question about "AI demand."

Some analysts pointed out that following last week's staggering drop of about 14% and a market value evaporation of $400 billion, Huang Renxun's keynote speech was seen as an opportunity to calm investor nervousness. Despite recent selling, Nvidia's stock has still risen nearly 150% in the past 12 months.

In the past two weeks, Nvidia's stock price has fallen by 20%, mainly due to concerns that the artificial intelligence investment frenzy that fueled the market's rise since the launch of ChatGPT in November 2022 could soon start to fade.

On the one hand, many people are worried that the economic slowdown will prevent the continued rapid growth of AI demand. At the same time, investors in NVIDIA products face a major question: Can AI generate enough income to justify the huge investment in GPU and other AI hardware?

Therefore, Huang Renxun's latest speech 'answering the big question in the minds of investors', his emphasis on the 'size of demand', and even the exaggerated description without lack of showmanship, happened to be the key to driving NVIDIA and the US stock index to make a major reversal. Huang Renxun also informed the audience that generative AI is still in its early stages and it will expand into more areas beyond data centers, igniting the imagination for future growth.

Barron's magazine reported that the strong financial report of the software giant Oracle this week reminds people that the demand for NVIDIA's AI-related chips is expected to remain strong, a trend that was confirmed by Huang Renxun today. In addition, Musk's startup xAI, is using a large number of NVIDIA GPUs to build its Colossus AI training infrastructure. Meta has long planned to purchase NVIDIA's H1 chips worth billions of dollars by the end of this year. These large-scale technology clients with expansion plans are enough to make NVIDIA dominate the AI chip market.

The views of mainstream investment banks have been mixed recently, with Goldman Sachs still bullish, Barclays calling for calm, and Citigroup stating that NVIDIA is no longer the preferred AI stock.

Goldman Sachs' well-known analyst Toshiya Hari maintains his 'buy' rating on NVIDIA this week, and the Goldman Sachs team believes that NVIDIA's stock was oversold last week. The reason cited is that 'demand has remained strong':

'First, the demand for accelerating computing is still very strong. We have always focused on the AI chip demand of super-scale cloud providers such as Amazon, Google, Microsoft, etc., but you will see that the demand is expanding to other companies and even sovereign countries.'

(Note: Hyperscalers mainly refer to cloud computing platform service providers with multiple data centers and tens of thousands or even millions of servers. It can also be translated as 'super-scale operators'.)

Goldman Sachs believes that the selloff in NVIDIA started with the positive financial report released by the company on August 28, which did not meet Wall Street's super-high expectations, such as revenue exceeding expectations by nearly 4.1 percentage points, the smallest proportion since the fourth quarter of the fiscal year 2023. The biggest debate around NVIDIA at the moment is whether its profit momentum can continue in 2025 or even 2026.

Since the beginning of 2023, investors' attitude towards artificial intelligence has undergone a nearly 180-degree shift. Investors' patience is wearing thin, and they want to see - rather than be told - an improvement in the revenue and profit margin driven by artificial intelligence.

However, with profound generational technological changes such as artificial intelligence, it is futile to make judgments solely based on short-term cost and return economics. The focus should be on long-term goals. Goldman Sachs estimates that starting from the second half of 2025, generative AI will begin to make substantial contributions to industry growth.

Therefore, Goldman Sachs believes that Nvidia's competitive position remains very strong. We do believe that Nvidia is the preferred choice in the commercial silicon field, even compared to customized (self-developed) silicon chips, they have an advantage in terms of innovation speed.

However, Citigroup's US stock strategist Scott Chronert warned last week, during Nvidia's sharp decline, that Nvidia may no longer be an exciting and conventional large growth stock:

Just by looking at the deceleration in the growth rate of performance outlook guidance, it can be seen that its most profound performance and fundamental impact on the market trend may have already passed.

The bank's view is that the expectation of the Federal Reserve's impending rate cuts is accelerating the outflow of funds from the once dominant technology leaders. Although it still predicts strong profit growth for Nvidia, the bank believes that Nvidia will no longer be a significant driving force behind the S&P 500 index returns in the future. The sell-off of its stock price after its "profit steady but not outstanding" earnings report indicates that the position of this semiconductor giant as the market's leading AI darling is fading, and in comparison, Apple has replaced Nvidia as the preferred AI stock for the Citigroup US stock team.

In addition, Barclays analysts also stated in June that, based on their preliminary estimates, by 2026, the AI capital expenditure of super-scale cloud providers is expected to be sufficient to support the existing internet and 12,000 new AI products of a scale similar to ChatGPT:

But will this happen? Silicon Valley is hotly discussing how AI is changing the world, and we do expect there to be many new services that will reveal some bullish cases, but maybe not as many as 0.012 million.

Editor/Somer