If generative AI is the engine behind a new industrial revolution, bullish market speculators believe the recent resurgence in Nvidia stock might just be the turbocharger.
The GPU giant reassured markets worried about slipping demand with its fiscal first-quarter results, which handily beat estimates but lowered revenue guidance. Shares rose during midday trading Thursday but gave up some of those gains as investors digested Wednesday night's earnings call.
"I don't think the growth story is done," Joe Fahmy, managing director at Zor Capital, told Investor's Business Daily's "Investing with IBD" podcast. "They're growing at a slower rate, but still the growth is insane."
Revolutionary Tech Drives Sustained Market Growth
Beyond the short-term moves, Fahmy says Nvidia stock is likely to be a long-term player in generative AI as it brings in a period of sustained market growth.
"What fuels bull markets are inventions, things that revolutionize and change our lives, whether it's the railroads back in the '20s or television, airplanes, drug discoveries, PCs, smartphones, the list is endless," said Fahmy.
He points to similarities in the performance of the Nasdaq composite in the 18 months following the release of web browser Netscape and the performance of the Nasdaq since the release of generative AI ChatGPT over the same time frame. In both cases, the tech-heavy index gained more than 50%.
Fahmy says the examples of Netscape in the 1990s and ChatGPT now are emblematic of their underlying technology's rise to prominence: the internet and generative AI.
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Markets Running In The '90s
Fahmy points to how markets began to take off after three years, with the Nasdaq in 1997 surging past 125% vs. 1994. "It's not going to be a smooth ride," he said, noting the market saw major corrections like the Japanese debt crisis and Russian debt crisis.
"Fast-forward to today, you're going to have a hiccup with tariffs and maybe a year or two from now, you might have another big pullback as well," Fahmy said.
But the overall turbocharged economy in the 1990s also crowned winners like Microsoft, IBM and Cisco, which provided the infrastructure underpinning much of the early internet. "The analogy is, what's the new amazing invention of the time?" said Fahmy.
Nvidia Stock To Fuel Five-Year Bull Market
Nvidia's success in providing the chips needed to power generative AI could fuel another five-year bull market, Fahmy says.
Meanwhile, Nvidia stock continues to impress investors by showing long-term potential. He says investors are "worried about Blackwell sales when (CEO Jensen Huang is) already thinking two or three more products into the future right now," Fahmy said. "If this bull market led by AI continues, I think it can do well for the next year or so."
The chipmaker rose on Thursday, breaking out of a cup-with-handle base with a buy point of 137.40, according to IBD analysis.
While investor fears about reduced demand and production issues subsided following the earnings report, the stock's fade off intraday highs could be a signal that shares are getting overheated, at least in the short term.
The bounce-back for Nvidia stock in recent weeks comes after underperforming the S&P 500 for much of the last year.
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