Dan Ives Says Nvidia Demand Is Outpacing Supply "12 to 1." Here's What That Means for the Stock's Next Move.

Key Points

• Revenue is surging as tech companies scramble to buy Nvidia chips.
• Higher capital expenditure suggests the chipmaker's results will continue to improve.
• Dan Ives suggests a 12-to-1 chip shortage before accounting for physical AI.
• 10 stocks we like better than Nvidia ›

Nvidia (NASDAQ: NVDA) is only up by 4% year to date, but comments from tech analyst Dan Ives suggest that the sluggish returns won't last for long.

"Demand to supply today is 12 to 1 for their chips. Physical AI hasn't even started to play out," Ives said on CNBC. The long-established tech bull also believes the AI revolution is only in the third inning.

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His comments suggest Nvidia can break out of its market underperformance, and there's some evidence pointing in that direction.

Tech giants are committed to high capital expenditures

Nvidia's biggest customers are rushing to spend as much money on AI as possible. While Nvidia's GPUs aren't the only part of capital expenditures, they are a large focus for tech giants.

Alphabet raised its full-year capital expenditure guidance to $195 billion-$205 billion. That's a meaningful jump from the $180 billion-$190 billion in guided capital expenditures earlier in the year. Amazon also raised its projected capital expenditures to $220 billion, with higher memory costs playing a big role.

All of these AI expenditures are coming with revenue acceleration. Microsoft also set ambitious capital expenditure targets but told investors it would achieve positive free cash flow in fiscal 2027. That news eased investors' concerns about AI costs, as Microsoft confirmed it wouldn't need to rely on dilution or bonds to fund AI spending.

Nvidia's fundamentals continue to improve

There is a meaningful mismatch between Nvidia's 4% year-to-date returns and its financial performance. The ongoing supply shortage suggests Nvidia can maintain its current momentum, putting it at further odds with its recent returns.

Revenue surged by 85% year over year in the company's fiscal 2027 first quarter (ended April 26, 2026). Net income more than tripled year over year, resulting in a 22 forward P/E ratio. Its P/E ratio is a similar value to the S&P 500's P/E ratio, even though Nvidia grows faster than almost every company on the index.

When companies like Nvidia deliver high revenue numbers, some investors wonder how long it will last. Ives' commentary suggests this is still early, which is a good sign for Nvidia investors. If the shortage is really 12:1, there are a lot more chips that tech companies need to buy. Physical AI like humanoid robots and self-driving vehicles can expand the shortage and give Nvidia more years of exceptional revenue growth.

As investors realize Nvidia's growth can last for multiple years, they will rerate the stock higher from current levels.

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Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.