By coinnews 
00:00 Speaker A
Seaport Research hitting Nvidia with the rare sell rating, as it initiates coverage on semiconductors. Seaport noting AI is bringing about a secular shift in the industry. Jay Goldberg, senior analyst at Seaport Research partners joining us now to discuss this. Jay, it is great to have you here. So you’re initiating Nvidia with a sell, uh, you might, Jay, per Bloomberg be the only sell on, on the street. Explain the rating, rating to us, Jay.
00:27 Jay Goldberg
Great. Great. Uh, thanks for having me. So, put simply, I think the AI story, we’ve been talking about it for years. We all know about it. It’s fully priced into Nvidia right now. They’re a good company, they make great products, but they’ve said already their newest line of products, their Blackwell line is sold out for the year. They’re capacity constrained. Once you’re sold out, the, the, the room for upside is, is pretty minimal, the bias shifts towards the downside, right? There’s not much they can do to get above where consensus is, but there are a lot of things that can trip them up. There’s lots of small things, snafus. There’s a lot of friction in the system. And I think that uh, we should be concerned about those and that, you know, I, semiconductors are cyclical, and it’s important to remember that.
01:37 Speaker A
Um, Jay, um, what about this idea that there might be some sort of potential tariff or export control relief for Nvidia, um, that wouldn’t necessarily affect Blackwell, but could affect some of its other chips?
02:02 Jay Goldberg
Well, I, I think that there’s two sides of this tariff story for Nvidia. One is their cost of importing things from China. A lot of their supply chain comes from Asia. Most of the analysis we’ve seen shows that that impact is fairly minimal. So that the, the hyperscalers, the Googles and the Amazons of the world can continue to buy Nvidia chips and import them into the country, essentially, you know, no, no tariff or very low tariff. The flip side of that is what’s going on in China. China would very much like to get their hands on more Nvidia chips, um, but that seems very increasingly difficult in this geopolitical environment. So it’s less about tariffs and more about this perceived rivalry between the US and China’s AI race. Uh, and I, I, I don’t see that lightning up anytime soon. And even if it does happen, uh, you know, it’s, it’s still fairly minimal. I think we’ll still, there will still be some restrictions, so it won’t be a, a, a quick snapback.
03:41 Speaker A
Jay, you know, on the big tech companies that have reported since on CAPEX, Jay, I mean, and you’ve watched obviously, I mean, you saw Alphabet reiterate, Microsoft reiterate, uh, Meta actually raised. Uh, that would seem to be all good news for Nvidia, Jay. So I guess you’re saying yes, it is good news, but that, that simply is priced in at these levels.
04:19 Jay Goldberg
That’s right. It’s priced in for these levels. And I think it’s important to remember what they’re talking about is CAPEX for this year. It’s a little early to be talking about CAPEX budgets for next year, but in my conversations I’m having with everybody is there’s a growing scrutiny being applied to AI spend. We’ve had some really, really big numbers this year from all the hyperscalers. I think it’s, we’re starting to see signs that, you know, I don’t think anyone’s gonna cut drastically, but there are certainly signs that the finance team is starting to ask questions. A year ago, it was all AI all the time, but now the, the CFO has entered the chat and is starting to ask like, what, what’s the return on this investment? And just to be clear, I’m a believer in AI. I think there’s a lot of potential there. I just think it’s going to take us a few years as an industry to really find those compelling use cases. And as we do that, there’s going to be, you know, a sort of gravity asserting itself and people are going to ask what’s the return on this investment? And I think that is, that, that sets us up for potential for a pause, at least a slowing.
05:58 Speaker A
Jay, even as you have the sell on Nvidia, do you have a buy on Broadcom? And of course Broadcom has gotten a lot of attention as being, um, a company that could benefit from more companies sort of doing custom chips or contract made chips. Um, but when you talk about stuff being priced in, I mean, Broadcom is up about 60% over the last year, Nvidia is up about 36% or so. So how much of that outlook is priced in?
06:39 Jay Goldberg
So I, I think this, what I told my sales forces is that the AI story is fully priced into Nvidia and it’s not priced into Broadcom. Broadcom has a lot of other pieces going on there beyond the AI story, their networking business, their software business. But I don’t think the street entirely believes their AI story. And we actually saw this. They reported earnings in December and for the first time they laid out their opportunity for AI. And it was large. It was a massive opportunity. Anytime Nvidia loses share today, it’s to one of the hyperscalers doing their own chip and Broadcom makes a lot of money helping them bring those chips to market, right? So when they laid out their AI story, Broadcom was up 20, 25% on that, right? And then in January, we saw the deep seek story come out and everyone had a momentary panic that we weren’t gonna need GPUs anymore. Uh, and Broadcom essentially gave up all those gains, right? And I think, I think there’s still a lot of show me built into the Broadcom story around AI. And you know, the street doesn’t believe it, I do.
08:21 Speaker A
Jay, thanks a lot. Appreciate it.
08:26 Jay Goldberg
Thank you.