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Nvidia's Rout Makes for Compelling Chance to Buy, BofA Says
Artificial intelligence darling Nvidia Corp. is facing near-term headwinds that are making its valuation look compelling, giving investors an attractive buying opportunity, according to Bank of America Corp. Shares of the chipmaker are down about 15% from its late August earnings release, when the company failed to live up to investors' lofty expectations. The downward pressure could continue in the coming weeks as Nvidia grapples with production issues surrounding its much-awaited Blackwell chips, recent regulatory scrutiny, more cautious investor sentiment toward the AI trade generally, and overall market volatility.
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Nvidia's Rout Makes for Compelling Chance to Buy, BofA Says
(Bloomberg) -- Artificial intelligence darling Nvidia Corp. is facing near-term headwinds that are making its valuation look compelling, giving investors an attractive buying opportunity, according to Bank of America Corp. Shares of the chipmaker are down about 15% from its late August earnings release, when the company failed to live up to investors' lofty expectations. The downward pressure could continue in the coming weeks as Nvidia grapples with production issues surrounding its much-awaited Blackwell chips, recent regulatory scrutiny, more cautious investor sentiment toward the AI trade generally, and overall market volatility. Combined, these could create an "enhanced" buying opportunity for investors, as Nvidia's stock slips within the lowest quartile of valuation seen in the past five years, wrote BofA analysts led by Vivek Arya. "The key fundamental recovery catalyst will likely be supply chain data points over the next several weeks, confirming the readiness of new Blackwell product shipments," the analysts said in their Sept. 4 note. Nvidia shares have been on a rollercoaster ride in recent months, adding and erasing hundreds of billions of dollars in market value since a record high in June. That's moved the broader S&P 500 Index, where Nvidia is the third-largest stock behind Apple Inc. and Microsoft Corp. So far this year, the stock is the top performer on the S&P 500, up about 115%. Shares of Nvidia rose as much as 3.2% in intraday trading on Thursday, but are set to lose more than 10% overall this week, putting them on track for their worst week since April. Despite the lack of positive catalysts in the near-term, the stock should be supported over the next few years as companies build out their AI capabilities using Nvidia chips, including the firm's Blackwell and Hopper lines. "The tech industry will give itself at least another 1-2 years of intense buildout of NVDA Blackwell chip with its 4x lift in AI training and 25x lift in inference," reads the BofA report. "Efforts thus far with the first wave of large language models (LLM), using NVDA Hopper was just the teaser." BofA reiterates that Nvidia is a top sector pick and buy-rated stock. The firm's $165 price target implies about 55% upside from Wednesday's close. Wall Street is overwhelmingly positive on shares of the chipmaker. Nvidia has 66 buy ratings, 8 holds and no sells, according to data compiled by Bloomberg. --With assistance from Bre Bradham and Ryan Vlastelica.
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Nvidia's recent stock decline offers an attractive entry point for investors, according to Bank of America analysts. Despite the drop, the company's long-term growth prospects in AI remain strong.
Nvidia Corporation, the leading manufacturer of graphics processing units (GPUs), has recently experienced a significant stock price decline. The company's shares have fallen by about 14% from their all-time high in late August, wiping out approximately $210 billion in market value 1. This downturn has caught the attention of investors and analysts alike, prompting a closer examination of Nvidia's market position and future prospects.
Despite the recent stock rout, Bank of America (BofA) analysts remain optimistic about Nvidia's potential. In a note to clients, BofA analyst Vivek Arya stated that the current dip presents a "compelling opportunity to buy" Nvidia shares 2. The bank maintains its "buy" rating on the stock and has set a price target of $700, suggesting significant upside potential from current levels.
Several factors contribute to BofA's positive outlook on Nvidia:
AI Leadership: Nvidia continues to dominate the artificial intelligence (AI) chip market, with its GPUs being essential for training and running AI models 1.
Strong Financials: The company has demonstrated robust financial performance, with a notable increase in revenue and earnings in recent quarters 2.
Market Expansion: Nvidia is actively expanding its presence in data centers and other high-growth sectors, which is expected to drive future revenue growth 1.
While the outlook appears positive, investors should be aware of potential risks:
Valuation Concerns: Some analysts argue that Nvidia's stock remains expensive even after the recent decline, trading at a premium compared to its peers 2.
Competition: The AI chip market is becoming increasingly competitive, with rivals like AMD and Intel working to catch up 1.
Regulatory Scrutiny: Nvidia faces potential challenges from regulators, particularly regarding its proposed acquisition of Arm Ltd 2.
The recent stock decline has sparked mixed reactions among investors. While some view it as a natural correction after a period of rapid growth, others see it as an opportunity to invest in a company well-positioned for long-term success in the AI and high-performance computing markets 1.
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