NVIDIA falling well? Bank of America: Now there is an attractive buying opportunity
Bank of America believes that the key fundamental catalyst for NVIDIA's recovery could be the supply chain data in the coming weeks, confirming the readiness of Blackwell's new chip shipments. Bank of America's target price for NVIDIA implies that the stock price is expected to rise by 55% from this Wednesday
Last week's financial report failed to boost NVIDIA, the "darling" of AI for nearly two years, but instead suffered a head-on blow from the September stock market "curse": a cumulative 11% drop in the first two trading days of September. However, a recent report from Bank of America believes that the recent unfavorable environment has made NVIDIA's valuation look attractive, providing investors with an enticing buying opportunity.
On the first trading day of September, NVIDIA's stock price fell by 9.5% on Tuesday, shrinking its market value by nearly $280 billion in a single day, marking the largest decline in market value of a single U.S. stock. Wall Street News subsequently mentioned that NVIDIA's stock price fell after the release of the financial report, highlighting concerns from investors about the stock being overvalued, the slowdown in revenue growth, and worries about the sustainability of the overall AI chip investment frenzy. NVIDIA's third-quarter revenue guidance indicates that revenue growth will slow from triple-digit percentage growth for five consecutive quarters to nearly 80%, interpreted by some as a sign of cooling demand for the company's AI chips. The financial report raised doubts in the market about the sustainability of massive investments in AI hardware.
Furthermore, after the market closed on Tuesday, news emerged that the U.S. Department of Justice had issued a subpoena to NVIDIA for an antitrust investigation, adding to the impact of regulatory risks, which prevented NVIDIA from rebounding successfully on Wednesday.
In short, the financial report that did not meet Wall Street's highest expectations, production issues with NVIDIA's highly anticipated Blackwell chip, the recent regulatory scrutiny, cautious investor sentiment towards AI trading, and overall market volatility have all contributed to this round of NVIDIA's significant decline. A recent report by analysts from Bank of America, including Vivek Arya, believes that these factors combined can create a "strengthened" buying opportunity for investors, as NVIDIA's stock price has fallen to the lowest quartile range of valuation in the past five years.
The report states:
"The key fundamental catalyst for NVIDIA's recovery may be the supply chain data in the coming weeks, confirming the readiness of the Blackwell new product shipments."
Although NVIDIA's stock price lacks positive catalysts in the short term, as enterprise customers use NVIDIA chips including the Hopper and Blackwell series to build AI capabilities, its stock price is expected to be supported in the coming years. The Bank of America report states:
"The tech industry will spend at least another one or two years intensively building NVIDIA's Blackwell chips, which will increase AI training capabilities by 4 times and inference capabilities by over 25 times. So far, it is still part of the first wave of large language models (LLM), and using NVIDIA's Hopper (chip) is just the beginning."
Bank of America reiterated NVIDIA as the top pick in the industry and gave the stock a buy rating with a target price of $165. This target price implies that Bank of America expects NVIDIA's stock price to rise by approximately 55% from Wednesday's closing priceApart from Bank of America, some market participants believe that this is a good opportunity to bottom fish NVIDIA. Piper Sandler analyst Harsh Kumar remains bullish on NVIDIA, pointing out strong market demand for NVIDIA's Hopper chips, expecting further growth in the second half of the fiscal year. Meanwhile, revenue from Blackwell chips is on track. Wedbush Securities analyst Daniel Ives stated that NVIDIA's chips have become the new oil and gold in the IT field, driving the AI revolution and currently being the only choice.
On Thursday this week, NVIDIA's stock price initially fell nearly 1.4%, then quickly rebounded. It rose over 3.2% intraday when hitting a new daily high in the morning session, but later gave back most of the gains. By midday, the increase was less than 1%, rebounding after two consecutive days of decline, moving away from the closing low since August 9th that had been refreshed for two consecutive days