Why Analysts Are Confident in Nvidia Despite Stock’s Recent Correction

Nvidia (NVDA) shares climbed 1% in early trading Thursday as the stock rebounds from its recent slide into correction territory with analysts saying investors shouldn’t worry, citing Nvidia’s strengths amid the artificial intelligence (AI) boom.

Bank of America Says Nvidia Stays Top Pick After ‘Refreshing Pause’

Bank of America (BAC) analysts called Nvidia’s recent selloff a “refreshing pause,” noting that volatility is not unusual for the stock and said they are confident in the chipmaker’s ability to maintain or gain market share. The recent selloff would mark the ninth time since ChatGPT’s launch in 2022 that Nvidia shares saw a drop of 10% or more, according to Bank of America research.

A number of market factors may have contributed to the recent decline, including higher-than-expected inflation, market volatility, competition concerns, and “AI stock fatigue,” among other things, the analysts said.

While some investors may be worried about recent chip announcements by tech giants such as Alphabet’s (GOOGL) Google Axion Processor and Intel’s (INTC) Gaudi 3 AI accelerator, Bank of America reiterated its “core view” that Nvidia is a top pick.

The analysts said they project Nvidia will “continue to dominate,” capturing more than 75% of the around $90 billion accelerator market. Bank of America anticipates In-house custom chips by companies like Google, Microsoft (MSFT), and Amazon (AMZN) will account for 15% to 20% of the market, while another 15% to 20% could be spread across others like Advanced Micro Devices (AMD) and Intel (INTC).

Blackwell Ramp Concerns ‘Unwarranted,’ Raymond James Says

Raymond James analysts said they “believe concerns regarding a potential pause in customer spending ahead of Blackwell ramps are unwarranted,” citing strong demand for Nvidia’s AI-capable chips.

“Interfacing demand continues to outpace GPU supply,” the analysts wrote, adding that the firm expects “H200 to be a key near-term driver followed by B100 / B200 ramps in 2H24.” They noted that while “H-series supply is improving, management continues to expect B-series to be supply constrained at launch due to strong demand.”

They also highlighted that sovereign AI could be an emerging driver for the chipmaker.

Raymond James analysts said they “expect revenue momentum to sustain well into 2025 given compelling TCO benefits of Blackwell, exponential growth in AI model complexity, and intense competition among hyperscalers.”

Wedbush Remains Bullish on Nvidia as Dominant Player in AI Era Amid ‘Unchartered Territory’

Wedbush, which said the “AI revolution” has arrived, stood firm in its bullish stance on Nvidia as a dominant player in the AI era.

“Investing in popular tech stocks isn’t an activity for the meek” and “NVDA is much more so for the simple fact that the AI frontier is unchartered territory, so there’s necessarily more variability to future performance vs. industries where we have a history of cycles,” Wedbush analyst Matt Bryson told Investopedia.

Bryson noted that while “NVDA’s results clearly move stocks with even a tangential relationship to AI,” the firm expects Blackwell, the latest version of Nvidia’s AI tech, to boost the company’s earnings as it comes to market.

CFRA Unfazed by the Pullback

CFRA analyst Angelo Zino told Investopedia Nvidia’s dip is “reasonable in nature” when considering the significant gains that the stock has seen as a driver of the “AI rally.”

“Selling oftentimes will strike more selling,” but, “eventually what happens [when] the valuation looks extremely enticing” is buyers return to the stock, Zino said. CFRA expects this to be the case following the correction.

While the selloff could indicate a sentiment shift for investors, Zino said CFRA is unfazed by the pullback and believes in the chipmaker’s long-term growth trajectory.

Nvidia shares were 1% higher at $879.01 after the opening bell Thursday. The stock has gained about 82% since the start of 2024 and more than tripled in value in the past 12 months.

UPDATE—April 11, 2024: This article has been updated to reflect additional comments by Raymond James, a title change, and more recent share price information.