Nvidia shares experienced a surge in early Wednesday trading, boosted by gains from rival chipmakers and a bullish research note from a top analyst. The stock, which has lost nearly half a billion dollars in market value this month, has suffered its worst performance in almost two years amid slumping chip sales. Investors, worried about Nvidia’s rapid gains over the past six months, have reduced their holdings. They are concerned that major customers like Microsoft, Meta Platforms, and Amazon might reduce capital spending as they seek to monetize their significant AI investments.
There are also concerns about a potential slowdown in Nvidia’s sales as customers hold off on purchasing older H100 chips in anticipation of the new Blackwell GPUs set to launch later this year. Supply-chain issues and increasing competition, particularly from Advanced Micro Devices (AMD) and its new MI300X series GPUs, have also negatively impacted sentiment. However, a top analyst and his team see the recent slump as a “good entry point” for investors, adding Nvidia to their Top Pick list.
The bank maintained its $144 price target and rated the stock overweight ahead of the company’s second-quarter earnings report in late August.
Analyst note propels Nvidia’s gains
The analyst and his team noted that markets seem to have a “glass-half-empty view” of some hyperscale spending comments but added that there’s a “clear desire on the part of customers to continue to commit resources to developing multimodal generative AI.”
AMD’s bullish near-term outlook, highlighted by the chipmaker’s stronger-than-expected second-quarter earnings, reinforces this perspective.
AMD reported that sales from its MI series of chips surpassed the $1 billion mark for the first time in the past quarter and raised its full-year AI GPU sales forecast by $500 million, reaching $4.5 billion. AMD CEO Lisa Su expressed confidence in increasing supply and accelerating customer adoption. Microsoft, Nvidia’s largest customer, said that its capital spending for the fiscal fourth quarter, which ended in June, rose significantly year-over-year and predicted higher spending levels for the current fiscal year.
The top analyst also highlighted solid demand prospects for Nvidia’s H-series AI chips and the upcoming Blackwell line, which promises more than twice the performance of the current Hopper chips while consuming less energy. Nvidia maintains a commanding market share, expecting demand to transition from Hopper to Blackwell chips, increasing visibility for the company’s future prospects. Some Nvidia customers have reportedly returned to its products after testing rival offerings, indicating that Nvidia’s dominant market position is likely to continue in the coming year.
Nvidia shares were trading 8.8% higher early Wednesday, at $112.82 each.
