Artificial intelligence darling Nvidia surged after the company appeared to reassure investors worried about product delays. 

The stock has risen nearly 14% this month and rose 2.4% on Monday to its first record close since June. Nvidia is the second-best performing stock in the S&P 500 this year.

01 History of Navidia

CEO Jensen Huang announced that the much-anticipated Blackwell chip, which until recently had been delayed by engineering issues and triggered a sell-off that has since been resolved, is now in full production and in very high demand.

Adding to Nvidia's bullish outlook was a note from Morgan Stanley analysts last week, who said Blackwell orders were booked out to about 12 months, and all signs point to business remaining strong. The comments solidify the view that Nvidia remains the go-to way to invest in AI, especially as companies remain committed to AI initiatives. Semiconductors about AI.

Microsoft Corp. is expected to increase capital spending by nearly a third to about $58 billion in fiscal 2025, analysts on average estimate. There had been questions about the impact that production delays could have, so these updates are reassuring. In addition to Nvidia's optimism, TSMC's recent results also showed strong demand for AI, while a funding round for OpenAI gave it a valuation of $157 billion.

02 Recent news about OPEN AI

OpenAI recently released an AI model with inference capabilities, and Alphabet is also working on one. These events have reignited interest in the field, and there is a lot of excitement about inference-based AI use cases. Inference represents a new area for Nvidia, and it could be a huge new product category when you consider how compute-intensive it is. AI will bring steady demand for years. Analysts expect Nvidia's revenue to more than double this fiscal year and grow another 44% next fiscal year. Wall Street has repeatedly raised its expectations for Nvidia's earnings and profits over the past quarter.

Nvidia's strong growth prospects have kept its valuation stable, helping bulls maintain the buying case. The company's price-to-earnings ratio is more than 37 times, which is higher than the Nasdaq 100, but below its five-year average and below its peak of more than 44 times in June. Nvidia still looks strong. It remains very well positioned to take advantage of the AI opportunity. There are also signs of optimism in the options market.

There was a wave of buying in the options market on Thursday, which allows holders to buy more than 30 million shares at prices between $150 and $189 per share through March. Nvidia closed at $138.07 on Monday. The cost of call options relative to put options, known as skew, has fallen, making it cheaper to bet on further gains. The contracts expire after Nvidia is expected to release fourth-quarter earnings in late February. Analysts say the stock will continue to be volatile and orders will be erratic. But as long as Nvidia executes on its product roadmap, which will drive healthy growth, it will remain attractive.

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