Nvidia shares (NVDA) rose as much as 5% on Monday, leading a rally in tech stocks amid ongoing debate on Wall Street about whether the recent slump across the semiconductor industry was overdone.
Bank of America analyst Vivek Arya said Monday that Nvidia is one of his firm’s top “rebound” stock picks as he expects the semiconductor market to recover by the end of 2024.
“Our base case is for (semiconductors) to recover in the fourth quarter once seasonal headwinds subside,” Aria wrote in a client note.
In addition to Nvidia, Arya noted that Broadcom (AVGO) and KLA Corporation (KLAC) could also benefit from a stock recovery because they are “the most profitable vendors in their respective end markets.”
The PHLX Semiconductor Index (^SOX) has fallen nearly 18% in the last month, while Nvidia shares have fallen more than 15% in the same period. The sector has risen as market participants rotate out of large technology stocks.
Ayer reasoned that volatility is likely to continue with Nvidia’s next earnings release on Aug. 28 and through September, historically the worst month of the year for semiconductor stocks. Ayer noted that the current uptrend in semiconductor stocks has only lasted four quarters, while previous uptrends have typically lasted closer to 10 quarters.
Nvidia shares, in particular, have been under pressure amid growing concerns about the distribution of its Blackwell chips. Last week, The Information reported that the launch of Nvidia’s next-generation AI chips will be delayed by three months, potentially affecting major customers such as Microsoft (MSFT), Alphabet (GOOGL, GOOG) and Meta (META).
Nvidia then issued a statement saying that production of its next-generation Blackwell chips was “expected to ramp up” later this year, and Wall Street analysts are confident the issue will be resolved.
“If it really was a supply or timing issue, most investors would ignore it,” John Bin, equity research analyst at KeyBanc Capital Markets, told Yahoo Finance. “If it was a demand issue, Nvidia would have other issues. But our view is that they’ll up and raise[profit outlook]. Near-term demand won’t be an issue at all.”
UBS analyst Timothy Arcuri maintained his buy recommendation and $150 price target on the stock in a client note on Monday, but said Blackwell’s bulk shipments to customers could be delayed “up to” four to six weeks.
The story continues
“Major customers plan to launch their first Blackwell instances by April 2025,” Arcuri wrote. “AI Labs is still scaling and lengthening instance contracts, and enterprises are growing rapidly as a percentage of the demand mix, both bullish indicators.”
Additionally, Arcuri argued that the market may be underestimating NVIDIA’s future revenue growth. Right now, Arcuri believes the market is pricing NVIDIA’s revenue growth peak in 2025. However, Arcuri argued that 2026 “seems like a good chance to pick up again, given our discussions with customers.”
Josh Schafer is a reporter for Yahoo Finance. Follow him at X @_joshschafer.
For in-depth analysis of the latest stock market news and events that are moving stock prices, click here.
Read the latest financial and business news from Yahoo Finance
