Mark Matthews of Bank Julius Baer & Co. expects the technology sector to continue outperforming, driven by the monetisation of artificial intelligence (AI) by major players like Microsoft, Google, and Facebook.

While Nvidia has already seen significant gains from AI, Matthews expects a profit boost for other tech giants over the next six months.

“I do acknowledge that there has been some rotation into more cyclical sectors, like financials, and real estate, but the structural growth of the technology sector, we believe, is still going to remain very strong, and therefore, it’s still where we would want to have the bulk of our portfolios invested,” he said.

Matthews predicts strong second-quarter numbers and guidance for Nvidia.

Nvidia results for April to June quarter will be declared in the early hours of August 29 (Indian time).

“The two main things to look at are the orders that Nvidia has been giving to Taiwan Semiconductor, which makes Nvidia’s graphics processing units (GPUs), and how are the suppliers of Nvidia doing,” he noted.

By the end of June, Nvidia’s purchasing commitments to Taiwan Semiconductor had increased by 175% year-on-year (YoY), and this figure has likely continued to grow.

Also, one of Nvidia’s key suppliers, Fabrinet, which produces optical cables, reported a 120% YoY increase in its data communications business during Q2 and expects a significantly stronger performance in Q3.

Also Read: Nvidia shares keep Nasdaq, S&P 500 above flat line as investors in wait-and-watch mode

However, Matthews sees limited upside in the Nvidia stock with a fair value price target of $135 per share, only $6 higher than the current price.

A member of the “Magnificent Seven” group of megacaps, Nvidia has been responsible for over a third of the Nasdaq 100’s gain this year.

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