Shares of Nvidia (NVDA) rose more than 13% on Wednesday after better-than-expected guidance from peer AMD (AMD) and optimistic expectations from analysts at Morgan Stanley following a more than 20% drop in the stock.
AMD’s quarterly results released Tuesday night quelled some concerns that the AI trade had run its course as investors have been abandoning Big Tech over the past month. The company beat expectations on both the top and bottom lines and posted a better-than-expected outlook for the third quarter.
Additionally, tech giant Microsoft (MSFT) revealed increased spending on data center infrastructure in its latest quarterly results. AI chip vendors like AMD and Nvidia stand to benefit from Big Tech’s increased investment.
“The fear that some of this momentum isn’t going to continue, or maybe the fear that the revenue momentum isn’t going to continue over the next 12 months or so — I think that’s starting to subside,” Angelo Zino, senior equity analyst at CFRA, told Yahoo Finance on Wednesday.
Chippeggers including Broadcom (AVGO), Micron (MU), Taiwan Semiconductor (TSM), ASML (ASML) and Super Micro (SMCI) also rose on Wednesday.
Nvidia also got a boost on Wednesday from a report from Morgan Stanley analysts led by Joseph Moore, who upgraded the stock to a “Top Pick” following a recent pullback from record highs reached in June.
The company wrote that the roughly 25% sell-off in Nvidia shares “provides a good entry point as we continue to hear strong data points in the near and long term, with competitive concerns overstated.”
Morgan Stanley cited five key drivers of Nvidia’s recent decline: spending plans, competition, export controls, supply chain concerns and valuation concerns. But it said: “Despite these concerns, the earnings environment is likely to remain strong, for Nvidia and for the entire AI complex.”
The company maintained its Overweight rating and $144 price target on the stock.
Nvidia shares are still up more than 130% this year, outpacing the Nasdaq’s more modest 17% gain. The company is scheduled to report its next quarterly report on Wednesday, August 28.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X on @ines_ferre.
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