Nvidia (NVDA) shares rose more than 12% on Wednesday after rival AMD (AMD) gave a better-than-expected earnings outlook and a bullish outlook from Morgan Stanley analysts after the stock had fallen more than 20%.
AMD’s quarterly results, released late Tuesday, eased concerns that an investor pullout from big tech companies over the past month might have spelled the end of the AI trade. The company beat expectations on revenue and profit and also gave a better-than-expected third-quarter outlook.
Additionally, tech giant Microsoft (MSFT) revealed increased spending on data center infrastructure in its latest quarterly earnings. AI chip suppliers such as AMD and Nvidia are positioned to benefit from increased investment from big tech companies.
“I think the concerns that this momentum won’t continue, or that the earnings trajectory won’t be sustained over the next 12 months or so, are starting to ease,” Angelo Gino, senior equity analyst at CFRA, told Yahoo Finance on Wednesday.
Semiconductor-related companies such as Broadcom (AVGO), Micron (MU), Taiwan Semiconductor (TSM), ASML (ASML), and Supermicro (SMCI) also rose on Wednesday.
Nvidia’s shares got a boost on Wednesday after a report that Morgan Stanley analysts led by Joseph Moore had upgraded the company’s stock to a “top pick,” following a recent decline from record highs hit in June.
The roughly 25% selloff in Nvidia shares “presents a good entry point amid a string of strong near- and long-term data releases amid overblown competitive concerns,” the firm wrote.
Morgan Stanley cited spending plans, competition, export controls, supply chain concerns and valuation worries as five main factors for Nvidia’s recent share price decline, but said, “Despite these concerns, the earnings environment for Nvidia and the overall AI industry is likely to remain solid.”
The firm maintained its overweight rating and $144 price target on the stock.
Nvidia shares have risen more than 135% this year, outpacing the Nasdaq’s more modest gain of 17%. The company is scheduled to release its next quarterly report on Wednesday, August 28.
Ines Ferre is a senior business reporter at Yahoo Finance. Follow her on X at @ines_ferre.
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