(Bloomberg) – Nvidia Corp. shares (NVDA) are rallying after the company successfully allayed investor concerns about product delays and its long-term growth prospects.

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The stock is up 13% so far this month, on track for its first record close since June, although it remains below an intraday peak. It is the second-best performer in the S&P 500 Index this year.

The latest strength came after CEO Jensen Huang said that Nvidia's Blackwell chip was “in full production” and that demand for it was “insane.” These comments came after Blackwell was delayed due to technical issues, leading to a sell-off that has now been deleted. Additionally, a report last week from Morgan Stanley analysts who met with management said Blackwell orders “have been booked for approximately 12 months,” with “everything pointing to the business remaining robust and a very high future outlook.” has”.

Shares rose 2.2% on Monday.

The comments reinforce the view that Nvidia is still a preferred way to invest in artificial intelligence, especially as major companies continue to push ahead with their AI initiatives. Microsoft Corp (MSFT), for example, is expected to increase capital spending by nearly a third to about $58 billion in fiscal 2025, according to Bloomberg's average analyst estimates.

“There have been questions about the potential impact of production delays, so these updates are reassuring,” said Zehrid Osmani, portfolio manager at Martin Currie Investment Management.

Beyond Blackwell's optimism, Taiwan Semiconductor Manufacturing Co.'s recent sales showed strong AI demand, while a funding round for OpenAI resulted in a $157 billion valuation. OpenAI recently released an AI model with reasoning capabilities, which Alphabet Inc. is also working on.

These events “have reinvigorated interest in this space and people are really excited about the use cases for reasoning-based AI,” said John Belton, portfolio manager at Gabelli Funds. “Reasoning represents a new area for Nvidia, and given how compute-intensive it is, it could be a huge new product category.”

Belton sees Nvidia as a core holding and sees AI driving “steady demand” for years. “It's not an undiscovered stock, but the valuation is still reasonable if it can deliver the expected numbers.”

The story continues

Analysts expect Nvidia's revenue to more than double in the current fiscal year and rise another 44% the following year, according to data compiled by Bloomberg. The Street has continually raised estimates for Nvidia's earnings and profit over the past quarter.

Nvidia's strong growth prospects have kept the company's valuation in check and helped bulls bolster their case for further buying. It trades at about 37.5 times estimated earnings, a premium to the Nasdaq 100 index, but is below its five-year average and below a June peak of more than 44 times.

“Nvidia still looks impressive,” Osmani said of Martin Currie. “It remains very well positioned to take advantage of AI opportunities.”

There are also signs of optimism in the options market. There was a wave of buying on Thursday in the form of calls that allowed holders to buy more than 30 million shares at prices ranging from $150 to $189 through March. Nvidia closed at $134.80 on Friday.

The cost of calls compared to bearish put options – known as skew – has fallen, making it cheaper to bet on another rally. The contracts don't expire until Nvidia's fourth-quarter earnings release, expected in late February.

“The stock will remain volatile and orders will remain stagnant,” said Dan Flax, managing director and senior research analyst at Neuberger Berman. “But as long as Nvidia executes on its product roadmap, it will lead to healthy growth that keeps the stock attractive.”

Tech chart of the day

Shares of Tesla Inc. fell 8.8% on Friday in the wake of the Robotaxi event, with the stock falling near a key technical level. Shares closed just slightly above their 100-day moving average, which they have held above since June. Falling below this threshold would be a negative sign for the medium-term dynamic development.

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– With support from David Marino.

(Market opening updates.)

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