(Bloomberg) — Artificial intelligence darling Nvidia faces near-term headwinds, but its valuation looks attractive, making it a tempting buying opportunity for investors, according to Bank of America.
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The company’s shares have fallen 15% since reporting earnings in late August that failed to meet investor high expectations. Downward pressure could continue in the coming weeks as Nvidia grapples with production issues surrounding its long-awaited Blackwell chips, recent regulatory scrutiny, investor cautious sentiment toward AI deals in general, and overall market volatility.
Combined, these factors could create an “enhanced” buying opportunity for investors as Nvidia’s stock price falls into the lowest quartile in the past five years, Bank of America analysts led by Vivek Arya wrote.
“Supply chain data points over the coming weeks confirming Blackwell’s readiness to ship new products will be key to any recovery,” the analysts said in a Sept. 4 note.
Nvidia’s stock has been on a roller coaster ride in recent months, with its market capitalization rising and falling by hundreds of billions of dollars since hitting an all-time high in June. This has led to fluctuations in the S&P 500 index as a whole, making Nvidia the third-biggest performer behind Apple and Microsoft. So far this year, the company’s stock has been the best-performing stock in the S&P 500, up about 115%.
Nvidia shares rose 3.2% in intraday trading on Thursday but are expected to fall more than 10% for the week, making it the company’s worst week since April.
Despite a lack of positive catalysts in the near term, the stock should be supported over the next few years as companies build AI capabilities using Nvidia chips, including its Blackwell and Hopper products.
“The tech industry will likely spend at least another year or two focused on developing the NVDA Blackwell chip, which will deliver a 4x improvement in AI training and over 25x improvement in inference,” the BofA report said. “Efforts to date on the first wave of large language models (LLMs) with NVDA Hopper are just the beginning.”
BofA reiterated that Nvidia is a top sector stock with a buy recommendation, and its $165 price target for the company suggests an upside of about 55% from Wednesday’s closing price.
Wall Street is overwhelmingly favorable toward the chipmaker’s stock, with 66 “buy” ratings, eight “hold” ratings and zero “sell” ratings on Nvidia, according to data compiled by Bloomberg.
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–With assistance from Bre Bradham and Ryan Vlastelica.
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