At Nvidia's (NVDA +1.67%) recent flagship GPU Technology Conference, CEO Jensen Huang kicked things off with a bang. He said he expects purchase orders for the company's Blackwell and Vera Rubin platforms and graphics processing units (GPUs) to reach $1 trillion by the end of 2027, a significant increase from the company's sales expectations for last year and this year.
However, the stock hardly moved on the news, and there's still significant skepticism surrounding artificial intelligence stocks. Why won't investors buy the stock right now?
Image source: Nvidia.
A sign of confidence
Blackwell is Nvidia's current, most advanced version of its GPUs and rack systems, which are installed in data centers that help companies deploy AI solutions. Vera Rubin is the next iteration, expected to roll out this year. The systems are designed with 1.3 million components and projected to generate 10 times the performance of Blackwell, which was rolled out in 2024.
The $1 trillion number is a significant step up from the $500 billion in AI hardware sales that management had projected in 2025 and 2026. The number is also ahead of the $950 billion number that Wall Street analysts had been modeling, on average. Huang said that the company is seeing demand from a range of customers, from start-ups to large companies.
This should signal confidence to investors because Nvidia has historically hit its quarterly numbers and met or exceeded guidance.
Why won't the market buy the stock?
One would think that a bright, flashy number like $1 trillion might move Nvidia's stock. But Nvidia is trading down nearly 7% this year (as of March 20), although part of this can likely be attributed to geopolitical and economic concerns not specifically tied to the company. The stock does not look terribly expensive, trading at about 22 times forward earnings.
One issue is that investors are becoming skeptical about whether the same intense levels of spending on AI infrastructure needed to power what some have called the fourth industrial revolution can continue. Collectively, the "Magnificent Seven" have guided to spend between $650 billion and $700 billion in capital expenditures this year.
However, these companies are increasingly resorting to debt to fund the build-out. Others are worried that the returns that investors are looking for from this intense spending simply won't materialize.
NASDAQ: NVDA
Key Data Points
Another reason the stock may be struggling to get moving is that it is already so big at a $4.2 trillion market cap. Investors are in uncharted waters, said TD Cowen analyst Joshua Buchalter. He added that the law of numbers suggests significant upside from this level could be difficult to achieve.
"Many investors, at least the ones that talk to semis analysts, want to pick stocks that they can at least create scenarios of them doubling," Buchalter wrote in a research note, according to Investor's Business Daily. "That would require Nvidia to hit about $9 trillion market cap, or the GDP of Germany ... plus India."
Additionally, despite this year's struggles, Nvidia is still up about 48% over the past year. The market has stalled a bit due to the conflict in Iran, economic concerns, and concerns around AI stocks.
Still, Nvidia does look attractive here. There's no reason to think that Huang would have so publicly stated this $1 trillion number if the company didn't have good visibility. Nvidia also plans to soon resume sales of its H200 chips to businesses in China. That's another material revenue opportunity that analysts have not been factoring into their financial models recently, due to prior geopolitical concerns between the U.S. and China.
So while I expect there to be some near-term overhang on the AI sector, it's hard to make the case against Nvidia right now.
