Why Nvidia stock popped today

Actions of Nvidia (NVDA 8.15%) moved higher today on more news, including a cooler-than-expected inflation report this morning, a well-received showing at a Goldman Sachs conference call this morning and news that the federal government may allow it to export chips to Saudi Arabia. As a result, the stock closed up 8% on the news.

Chip stocks also jumped big on the inflation ratio, with iShares Semiconductor ETF up 4.6% on the news, again Nasdaq Composite increased by 2.2%.

Image source: Nvidia.

Lower interest rates are good for Nvidia

Investors seemed unsure whether the CPI report, which showed inflation rose just 2.5 percent year-on-year in August, was good news for stocks, but by afternoon the Nasdaq was up, pace by Nvidia.

The Federal Reserve is expected to cut interest rates next week, but investors are uncertain whether it will cut rates by 25 or 50 basis points. Ideally, interest rates will fall while the economy remains strong or even gets stronger. That would be the best-case scenario for Nvidia, as lower rates make growth stocks more valuable and should encourage borrowing for investments in artificial intelligence (AI) infrastructure, meaning spending on Nvidia components.

Speaking at Goldman Sachs’ Communacopia conference, Nvidia CEO Jensen Huang didn’t make any major news, but praised the company’s technology and the future of generative AI, noting the company’s strengths, including its software libraries for applications such as autonomous driving and technology climatic. He also added, “The demand is so high that the delivery of our components, technology, infrastructure and software is really exciting for people because it directly affects their income. It directly affects their competitiveness”.

Finally, according to a report from Semaphore, the federal government is considering allowing Nvidia to export advanced chips to Saudi Arabia, which it would use to train advanced AI models. While Saudi Arabia is not a huge market, relaxing export rules would benefit Nvidia and potentially open up other markets.

Will Nvidia keep winning?

Tailwinds appear to be forming for the company as falling interest rates will support its investment and valuation. It is also scheduled to launch the Blackwell platform in Q4 and its top customers, including tech giants such as Microsoft, Meta platformsand Alphabetall said investing in AI infrastructure is a top priority.

Even after today’s earnings, Nvidia shares are still down 17% from their June high, leaving room for more gains. The stock still looks like a good bet to outperform, even after soaring over the past two years.