Cantor Fitzgerald’s CJ Muse on Nvidia: We will 'wholeheartedly be buying’ the stock

Key Concepts

• CUDA (Compute Unified Device Architecture): NVIDIA’s proprietary parallel computing platform and programming model that allows software developers to use a CUDA-enabled graphics processing unit (GPU) for general-purpose processing.
• Share Buyback: A corporate action where a company repurchases its own shares from the marketplace, typically to increase the value of remaining shares.
• TSMC (Taiwan Semiconductor Manufacturing Company): The world’s largest dedicated independent semiconductor foundry, which manufactures chips for NVIDIA.
• Beat and Raise: A financial scenario where a company reports earnings that exceed analyst expectations ("beat") and subsequently increases its future financial guidance ("raise").
• Long-only Investors: Institutional investors who only take long positions (buying assets expecting them to increase in value) and do not short stocks.

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Strategic Importance of the China Market

C.J. Muse, Senior Managing Director for Semiconductor Equity Research at Cantor Fitzgerald, emphasizes that the primary objective for NVIDIA CEO Jensen Huang regarding China is not merely the volume of chip sales. Instead, the critical strategic goal is to ensure that China adopts and builds upon the U.S.-based NVIDIA platform. By embedding the CUDA software ecosystem within Chinese technological infrastructure, NVIDIA creates a "moat" that makes its hardware indispensable, effectively locking in the market and its partners to the NVIDIA architecture.

Earnings Expectations and Financial Catalysts

Muse anticipates that NVIDIA will deliver another "beat and raise" performance in the upcoming earnings report. He identifies two specific catalysts that could drive the stock price:

1. Share Buyback Announcement: Muse suggests NVIDIA is likely to announce a share buyback program, building on previous allusions made in March.
   • Data/Research Finding: Cantor Fitzgerald’s analysis indicates that when companies with over $100 billion in market capitalization announce buybacks exceeding 5% of outstanding shares, they historically outperform the S&P 500 by 10 percentage points over the next 12 months and 15 percentage points over the next 24 months.
2. Supply Chain Dominance: Despite market concerns regarding competition, Muse argues that NVIDIA will outgrow its peers due to its relationship with TSMC. Because the compute market is currently "sold out," TSMC’s manufacturing capacity acts as a bottleneck. NVIDIA’s significant share of TSMC’s production capacity ensures they can fulfill demand more effectively than competitors.

Market Valuation and Investor Positioning

• Valuation: Muse highlights that NVIDIA is currently trading at 15 times the projected earnings for the following year, which he characterizes as the "cheapest name" in his coverage universe.
• Investor Sentiment: He notes that "long-only" institutional investors are currently underweight relative to the benchmark. He believes that a buyback announcement would serve as a catalyst to force these investors to "chase" the stock, driving the price higher.
• Dividend Strategy: There is ongoing discussion regarding a larger dividend commitment. Muse suggests that increasing dividends would broaden the shareholder base by attracting dividend-focused investment funds, potentially solving the issue of a limited investor audience.

Synthesis and Conclusion

The core argument presented is that NVIDIA’s long-term growth is underpinned by two pillars: the ubiquity of its CUDA software ecosystem and its superior access to TSMC’s manufacturing capacity. While the market has historically been lukewarm to NVIDIA’s consistent "beat and raise" quarters, the combination of a potential share buyback and an undervalued P/E ratio (15x forward earnings) positions the stock for significant upside. Muse maintains a "Buy" rating with a $350 price target, advising investors to accumulate shares leading into and following the earnings release through 2026 and 2027.