Nvidia (NVDA) stock closed with a weekly loss of 2% on Friday, as investors continue to sort out the hottest trade of the year despite a challenging last few weeks.
However, Wall Street analysts this week remained confident about the long-term prospects for Nvidia, which has now fallen about 20% over the past month and is down more than 25% from its record closing price.
Earlier this week, analysts at Piper Sandler warned of a “huge opportunity” to buy Nvidia, AMD (AMD) and ON Semiconductor (ON) following the recent sell-off in the sector.
Some analysts took the opportunity to push up stock prices during this sell-off.
“I think for 2025 … things are pretty well settled,” Antoine Chkaiban, technology infrastructure analyst at New Street Research, told Yahoo Finance on Thursday. “We know roughly how much [hyperscalers] expects capex to grow. Plans are already in place.” New Street upgraded Nvidia to Buy this week with a $120 price target.
On Friday, chipmaker TSMC (TSM), a supplier to Nvidia, reported 45% year-over-year revenue growth in July — a sign that demand for AI remains strong.
“We continue to see urgent demand across the board, which limits the risk of supply disruptions as customers wait for the next generation of chips to become available in large quantities,” Chkaiban said.
The so-called hyperscalers — Microsoft (MSFT), Meta (META), Amazon (AMZN) and Alphabet (GOOG, GOOGL) — have each remained consistent during recent earnings reports in their commitment to AI investments. And a large portion of that investment is flowing directly to Nvidia.
“Investors are likely to take a second look at names that are leveraging AI as they come within [semiconductors] “It continues to be the only area where spending is flowing in in terms of customer spending, as evidenced by the increases in capex by multiple hyperscalers this earnings season,” Jefferies analyst Blayne Curtis told Yahoo Finance on Friday.
Rumors of a potential delay for Nvidia’s Blackwell next-generation chip added pressure to the stock earlier this week. A two-month wait for the chips wouldn’t be insignificant, analysts say, but it still wouldn’t be enough to change Wall Street expectations.
Curtis’ team stated in a recent note that Nvidia’s delays “are real, but don’t change the thesis.” The company is expected to report quarterly results in late August.
Analysts and strategists who study the markets more broadly also see the recent cooling in AI trading as an opportunity.
Keith Lerner, chief marketing strategist at Truist Advisory, upgraded the tech sector to Overweight on Thursday after a 12% decline from a mid-July peak, with semiconductors down nearly 20%. Lerner noted that despite the decline in the price of these stocks, tech’s future earnings estimates continue to rise.
“This suggests that the recent setback was more due to overcrowded positioning than a shift in fundamentals,” Lerner wrote in a note to clients.
“Furthermore, we expect investors to return to technology in a cooling economic environment given the secular tailwinds generated by artificial intelligence (AI) and premium growth prospects. Additionally, we have seen capital spending toward AI continue to increase during the current earnings season.”
But recent changes in sentiment don’t necessarily solve the looming question that investors want answered down the road: How profitable will these massive investments in AI ultimately be?
“When it comes to technology, it’s clear that not only is it about the macroeconomic picture, but people want to see evidence that GenAI trading is actually delivering positive outcomes,” Luke Barrs, a managing director at Goldman Sachs Asset Management, told Yahoo Finance on Friday.
“We just have to be careful and wait and see over the next year or two.”
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X on @ines_ferre.
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