Elon Musk Dropped A Bombshell and NVIDIA Shareholders Should Be Ecstatic

Nvidia (NASDAQ:NVDA) shareholders have more to cheer about as we march closer to its quarterly earnings unveiling scheduled for next week. Undoubtedly, Trump’s tariff war has really caused volatility in shares of NVDA to pick up in recent months. And while it’s a more unnerving time to place a bet on Nvidia, given the tariff unknowns and GPU export restrictions, there’s plenty of reason to stand by the AI chip darling as the broad tech scene limps back from its rough start to 2025.

With Elon Musk recently sitting down with CNBC to announce his companies’ (Tesla (NASDAQ:TSLA) and xAI) expectation to continue buying up AI chips from Nvidia and its top rival, Advanced Micro Devices (NASDAQ:AMD), it’s becoming increasingly apparent that this generational AI boom isn’t going to be waiting around stagnant to see how the tariff war plays out.

If anything, AI is continuing to hit the accelerator despite rising recession fears and hopes for firms to pull back on capex a bit. Perhaps it’s the firms that continue investing heavily in AI that will be able to power ahead even as the economic headwinds and tariff-related disruptions begin to weigh.

Elon Musk’s Tesla and xAI to keep buying GPUs

Of course, only time will tell if Musk is getting a tad ahead of his skis at a time when investors may be just a bit more willing to reward lighter AI spending budgets. Either way, I think Musk’s appetite for GPUs seems to signal the AI boom isn’t slowing, just because the economy may.

If anything, Musk’s aggressive AI expansion plans could give other tech firms (specifically those in the Mag Seven) more of a reason to continue raising the bar on their own AI spending plans, even as investors stay focused on more clarity regarding returns on investment (ROI).

In any case, Deepwater Asset Management analyst Gene Munster thinks the latest Musk announcement, which entails bringing on 1 million GPUs apart from its Memphis-based Colossus facility, could work out to “a $30-40 billion ticket to NVDA” or “about 15% of the current Street revenue estimate.” That’s huge. And while it’s too early to tell if a new kind of AI boom is on the horizon, one has to think that Musk’s demand comments are a sign of things to come for the industry as a whole.

Either way, Tesla’s robotaxi is coming very soon (it’ll debut on Austin roads next month), and as the rollout kicks off, demand for next-level AI compute may need to scale up very quickly. Add Grok’s continued advancement into the equation as we enter the agentic AI age, and I think spending too little on AI infrastructure could prove riskier than spending too much.

If there’s a new kind of AI boom on the horizon, NVDA stock could prove too cheap at around $130 per share.

In any case, I think NVDA stock may still be undervalued in light of the overwhelmingly bullish comments and think it’s entirely possible another AI chip arms race could be in the works as Nvidia and AMD ready their next generation offerings, which could see demand overwhelm supply once again.

Indeed, Musk’s words could be the shot in the arm that NVDA stock needs to keep its latest relief rally going.

At the time of this writing, shares of NVDA are up 36% from their Liberation Day depths. And while the tech scene is on the retreat again following concern over rising bond yields and the U.S. credit rating downgrade, it may prove difficult to keep NVDA stock down for too long a duration, especially if its coming quarter impresses while more pundits give their take on Musk’s aggressive GPU spending plans.

Today, the stock goes for 31.15 times forward price-to-earnings (P/E), which seems too cheap for a firm that maintains a front-row seat to the AI boom. As we learn more about this new era of AI applications (agents), the path of least resistance for NVDA stock could be higher.

Of course, some smart folks, including Michael Burry, may be ready for NVDA to roll over (he reportedly purchased NVDA put options in the first quarter), but I continue to view NVDA as a dangerous stock to bet against, especially in light of Musk’s latest comments.

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