Wall Street Lunch: Nvidia’s Huang Bets On AI Supercomputer Factory

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CEO Jensen Huang previews new systema and a Tailwan supercomputer factory. (0:15) Netflix downgraded on valuation. (1:29) The Magnificent 7 are cheapest in 7 years. (3:30)

This is an abridged transcript of the podcast:

Our top story so far is about Jensanity! Nvidia (NASDAQ:NVDA) CEO Jensen Huang announced a wave of new technologies and partnerships at the Computex 2025 conference in Taiwan to reinforce the company’s dominance in AI computing space.

Huang opened the event with an update on the company’s next-generation GB300 systems, set to launch in Q3 of this year, offering major performance gains over current Grace Blackwell platforms.

The executive also introduced the RTX Pro Server, already in volume production, which delivers 4x the performance of the Nvidia’s former flagship H100 chips on DeepSeek (DEEPSEEK) workloads and 1.7x on some of Meta’s (META) Llama model jobs.

Nvidia also unveiled NVLink Fusion — a modular system that allows data centers to mix and match Nvidia GPUs with third-party CPUs or its own AI accelerators.

The company also launched DGX Cloud Lepton, a software service to connect AI developers with global cloud computing resources, and introduced detailed blueprints to help organizations build their own AI factories.

And in a major regional development, Nvidia is partnering with Apple supplier Foxconn (OTCPK:FXCOF) and Taiwan’s government to build an AI supercomputer factory powered by 10,000 Nvidia Blackwell GPUs.

Among active stocks, J.P. Morgan downgraded Netflix (NFLX) to Neutral from Overweight, citing a more balanced risk/reward scenario following its “significant” stock price appreciation and outperformance.

Analyst Doug Anmuth said given its digital subscription-based nature, they view the stock as “highly defensive” against tariff and macro concerns. But if tariff and macro pressures continue to ease, he expects investment dollars to rotate from defensive names to those that have been more vulnerable and under pressure.

TD Cowen lowered its rating on Shake Shack (SHAK) to Hold from Buy, a call based largely on valuation following the +50% rally from its April low.

Analyst Andrew Charles warned on comparable sales risk for the restaurant company as it runs up against the May 2024 launch of the Summer BBQ menu. Looking ahead, Shake Shack (NYSE:SHAK) is seen having less price and mix tailwinds seen over the last few years.

TXNM Energy (TXNM) is popping after Blackstone (BX) agreed to acquire the utility company for $61.25/share in cash, reflecting a total enterprise value of $11.5 billion including net debt.

The purchase price represents a 16% premium to Friday’s closing price of $52.88

In other news of note, Costco’s (COST) Kirkland Signature brand continues to be a major force in the retail sector. Costco launched the brand in 1995, consolidating its fragmented private label products under a single name inspired by its original headquarters in Kirkland, Wash.

Before Kirkland, Costco used around 30 different private label names, but co-founder Jim Sinegal sought a unified brand to ensure consistency and instant recognition for shoppers. Kirkland Signature’s rollout began with shampoo and vitamins, and the brand gradually expanded to cover a wide range of categories, from groceries to apparel, to enhance Costco’s reputation for value.

Kirkland Signature is now central to Costco’s earnings firepower, generating about $86 billion in annual sales to account for about one-third of the company’s total revenue. That revenue tally puts Kirkland’s in the same ballpark as Lowe’s (LOW) and Procter & Gamble (PG).

And in the Wall Street Research Corner, the Magnificent 7 stocks are currently at the lowest valuation since 2018, according to Goldman Sachs.

Strategist David Kostin says Apple (AAPL), Alphabet (GOOG) (GOOGL), Amazon (AMZN), Meta (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA) trade “at an NTM P/E of 28x in aggregate vs. 20x for the S&P 493, a 43% valuation premium that ranks in the 30th percentile relative to the past decade.”

“Although some of the group’s recent decline in valuation can likely be explained by concerns regarding AI investment, trade policy risk, and government antitrust litigation, the median Magnificent 7 stock currently trades at a modest valuation discount to what our cross-sectional valuation model would imply based on fundamental attributes such as earnings growth and balance sheet strength,” he said.

The risks to the relative performance of the Mag 7 to the S&P 493 are two-sided, he added.

“In the near term, lower valuations relative to the past two years, light positioning, and renewed investor interest in AI following 1Q earnings results should be tailwinds for the performance of the Magnificent 7. However, antitrust cases and investigations are ongoing against Alphabet, Apple, Microsoft, and Meta in both the US and Europe.”

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.