In an exclusive interview, former Goldman Sachs executive Michael Parekh indicated a noticeable shift in investor focus toward impending artificial intelligence initial public offerings (IPOs) such as SpaceX, OpenAI, and Anthropic. This transition may be impacting Nvidia’s stock performance, which saw a decline despite strong earnings.
Parekh compared Nvidia’s current situation to past space missions, specifically noting that the market has already anticipated the company’s robust growth narrative. He emphasized that Nvidia’s valuation remains appealing relative to its growth rate, particularly in light of the anticipated rollout of the Vera Rubin chip, which he views as a potential catalyst for future gains.
On Friday, Nvidia’s shares dipped over 1% even amidst broader stock market gains, reflecting a rather muted market reaction to its impressive earnings report. Parekh suggested that the forthcoming IPOs of SpaceX, OpenAI, and Anthropic are contributing to the subdued enthusiasm surrounding Nvidia’s stock, stating, “There are three, not one, but three mega AI IPOs lined up.” With SpaceX recently filing and aiming to raise $80 billion, and OpenAI and Anthropic set to follow in the coming months, he noted that investors might be reallocating funds, opting to take profits from Nvidia.
Despite a broad retail sentiment for Nvidia trending ‘extremely bullish’ on platforms like Stocktwits, the stock’s performance tells a different story. Nvidia recently announced an impressive revenue of $81.6 billion, reflecting an 85% year-over-year increase, alongside a gross margin of 74.9%. The company also unveiled an $80 billion buyback authorization and increased its dividend significantly. Yet, these milestones did not translate into significant upward movement in its stock price.
Parekh further explained that Nvidia is experiencing what he termed the “Apollo 13 problem,” likening it to a scenario where the excitement from previous successes overshadows current achievements. According to him, the stock’s limited volatility can be attributed to the fact that the market has largely priced in its strong demand and anticipated growth.
He argued that the anticipated IPOs represent a temporary distraction rather than indicating any fundamental shifts in Nvidia’s business prospects. With a valuation of approximately 26-27 times earnings for a company projected to grow between 85% to 95%, Parekh believes that Nvidia’s stock is still relatively undervalued. He pointed to the scheduled introduction of the Vera Rubin chip in 2026 as a significant factor that could generate positive momentum for the stock in the near future.
Overall, while Nvidia continues to deliver strong financial results and fundamentals, the looming IPOs within the AI sector are shaping investor sentiment and behavior in the short term, leading to a cautious outlook for its stock in the coming months.
