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Key Takeaways
- Nvidia stock was on track Friday to close out one of its best weeks all year as it rebounded from a two-week slump that erased more than 20% of the advanced chipmaker’s market value.
- Nvidia stock hit turbulence in recent weeks as Wall Street’s AI enthusiasm waned and its quarterly earnings report fell short of lofty expectations.
- Demand for AI and the Nvidia chips that enable it is expected to remain strong ,according to analysts, the vast majority of whom are still bullish on the stock despite its recent loss of momentum.
- Bernstein analysts in a note earlier this week reiterated Nvidia was one of their top semiconductor picks, calling it “the best way to play AI.”
Nvidia (NVDA) stock was on track Friday to notch one of its best weeks of the year and recover most of its losses from previous weeks as investors heeded analysts’ recommendations and bought the dip.
Nvidia shares were little changed midday Friday, putting the stock up nearly 16% for the week in its second massive rebound in a volatile month for the chipmaker’s stock.
Shares got a boost earlier this week when CEO Jensen Huang, speaking at a Goldman Sachs conference, called demand for Nvidia’s products “incredible” and touted the size of the company’s market opportunity.
“Generative AI is not just a tool. It is a skill,” Huang told Goldman Sachs CEO David Solomon at the event. “And so that’s why people think that AI is going to expand beyond the $1 trillion of data centers and IT, and into the world of skills.”
A Rough Two Weeks for Nvidia
Nvidia’s rebound came after the stock tumbled more than 20% in the prior two weeks as Wall Street’s optimism about all things AI waned and its quarterly earnings report, despite exceeding official estimates, fell short of investors’ lofty expectations.
And yet the turbulence appeared to have more to do with market sentiment than with the strength of the chipmaker’s business.
Reports that Nvidia’s next-generation Blackwell system would be delayed by a design flaw contributed to a sharp sell-off in early August. However, as far as analysts can tell, delays won’t have much impact on quarterly sales.
That’s in part because demand for Nvidia’s chips is so strong that customers will take whatever they can get.
Cloud hyperscalers Microsoft (MSFT), Amazon (AMZN), and Alphabet (GOOG; GOOGL) each said in their most recent earnings reports that they would continue to up their AI infrastructure spending—a substantial amount of which goes toward Nvidia chips—throughout this year and next as they build out their AI capabilities. Tesla (TSLA) CEO Elon Musk estimated that the electric vehicle maker would spend between $3 and $4 billion on Nvidia’s chips this year, representing as much as 40% of its total AI spending.
What Analysts Think About Nvidia Stock
The sheer strength of demand is one major reason that analysts still have Nvidia at the top of their buy lists despite the stock’s loss of momentum lately. Bernstein analysts in a note earlier this week reiterated Nvidia was one of their top semiconductor picks, calling it “the best way to play AI.”
“Yes, the numbers are so good (and moving so high, so fast) that investors worry about sustainability,” the analysts wrote. “However,” with margins likely to improve next year while Blackwell sales ramp up, “the time to worry is clearly not now.”
Bank of America Securities analysts struck a similar note when they argued late last week that Nvidia stock’s pullback offered an “enhanced Buy opportunity.”
Of the 63 Nvidia analysts tracked by FactSet Research, 50 rated the stock a “Buy,” the highest possible rating. Only four analysts gave the stock a neutral rating, and none recommended investors sell it.