Nvidia shares (NVDA) ended the weekly session down 2% on Friday as investors continue to sort out the tough past few weeks heading into the hottest trading session of the year.
But Wall Street analysts this week remain confident about Nvidia’s long-term prospects, as its shares have fallen about 20% since last month and are down more than 25% from their all-time highs.
Earlier this week, analysts at Piper Sandler & Co. said there was a “great opportunity” to buy Nvidia, AMD (AMD) and ON Semiconductor (ON) following the sector’s recent sell-off.
Some analysts have also used the offering to boost the stock’s rating.
“I think the picture is pretty set for 2025,” Antoine Choucairn, a technology infrastructure analyst at New Street Research, told Yahoo Finance on Thursday. “We pretty much know how much they expect[hyperscalers]to increase their capex. The plans are already set.” New Street raised Nvidia’s rating to “buy” this week and set a $120 price target.
On Friday, chipmaker TSMC (TSM), an Nvidia supplier, said its July sales rose 45% year over year, a sign that AI demand remains strong.
“We feel there is still urgent demand overall, which reduces the risk of shipments pausing while customers wait for next-generation chips to become available in volume,” Chikhaiban said.
The so-called hyperscalers Microsoft (MSFT), Meta (META), Amazon (AMZN) and Alphabet (GOOG, GOOGL) have all consistently signaled their commitment to AI investments in recent earnings reports, and much of this investment is flowing directly to NVIDIA.
“Investors will likely turn their attention back to AI stocks because semiconductors remain the only area seeing an influx of spending in terms of customer spending, as evidenced by multiple hyperscalers increasing capital expenditures in this quarter’s earnings,” Jefferies analyst Blaine Curtis told Yahoo Finance on Friday.
Earlier this week, rumors of a possible delay in the launch of Nvidia’s next-generation chips, known as Blackwell, put further pressure on the stock. Analysts said a two-month wait for the chips is no small thing, but not enough to significantly dent Wall Street expectations.
Nvidia’s delays are “real, but do not change the theory,” Curtis’ team said in a recent memo. The company is due to report quarterly earnings at the end of August.
Analysts and strategists looking at the market more broadly also see the recent slowdown in AI trading as an opportunity.
Keith Lerner, chief marketing strategist at Truist Advisory, upgraded the technology sector to overweight on Thursday after stocks fell 12% from their mid-July peaks and semiconductors dropped about 20%. Lerner noted that expectations for future tech earnings continue to rise despite the price declines in these stocks.
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“This suggests that the recent sell-off is due to over-concentration of positions rather than a change in fundamentals,” Lerner wrote in a client note.
“Furthermore, amid a cooling economic environment, we expect investors to return to technology given the secular tailwinds arising from artificial intelligence (AI) and its excellent growth prospects. Moreover, the current earnings season continues to see a rise in capital spending trends in AI.”
But the recent shift in sentiment doesn’t necessarily resolve a pressing question that investors will soon want answered: How will these big AI investments ultimately pay off?
“When it comes to technology, it’s very clear that not only is it about the macroeconomic picture, but also the fact that people want to see evidence that GenAI trading is actually delivering positive outcomes,” Luke Barrs, managing director at Goldman Sachs Asset Management, told Yahoo Finance on Friday.
“We just need to be cautious and wait and see how things develop over the next year or two.”
Ines Ferre is a senior business reporter at Yahoo Finance. Follow her on X at @ines_ferre.
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