A 400 billion US dollar market value evaporated in a week, Goldman Sachs still "stands" by NVIDIA: it's an over-selling situation
NVIDIA's market value evaporated by about $400 billion last week. Despite the sell-off, Goldman Sachs analyst Toshiya Hari still maintains a buy rating and believes the stock is oversold. Hari emphasizes a strong outlook for accelerated computing demand and notes that demand from enterprises and sovereign nations for NVIDIA is expanding. Although NVIDIA's Q2 earnings exceeded expectations, profit margins were the lowest since the fourth quarter of fiscal 2023, raising doubts about the sustainability of profits. Goldman Sachs analysts believe that investor confidence in artificial intelligence has fluctuated significantly
According to the financial news app Zhitong Finance, after falling nearly 10% last Tuesday, NVIDIA (NVDA.US) saw its market value evaporate by about $400 billion last week. Despite the sell-off, Goldman Sachs' chief analyst Toshiya Hari maintained a buy rating on this chip giant. When asked if the Goldman Sachs team believes that NVIDIA's stock is oversold, Hari agreed with this view.
Data from Bespoke Investment Group shows that the S&P 500 index had its worst September start since 1953, with tech stocks being one of the major factors in this round of turmoil. However, the index recovered some lost ground this Monday.
Hari stated at the Goldman Sachs 2024 Communications and Technology Conference, "NVIDIA's recent performance has not been great, but we still like this stock. First, the demand for accelerated computing remains very strong. We tend to spend more time on mega-cap companies such as Amazon (AMZN.US), Google (GOOGL.US), Microsoft (MSFT.US), and other global giants, but what you will see is that the demand is expanding to enterprises, and even sovereign nations."
NVIDIA announced its second-quarter earnings on August 28th. Despite exceeding expectations, the earnings were not good enough for Wall Street, leading to the subsequent sell-off of NVIDIA. Although NVIDIA's revenue in Q2 exceeded Wall Street's expectations by 4.1%, the profit margin was the lowest for the company since the fourth quarter of fiscal 2023.
One major controversy surrounding NVIDIA is whether its profit momentum is sustainable. Hari stated that investors are questioning whether this situation will not only occur in 2025 but also in 2026.
In a recent report, Goldman Sachs' stock research team wrote that since early 2023, investors' views on artificial intelligence have "swung nearly 180 degrees." Investors' patience is wearing thin, as they want to see rather than be told about revenue streams and profit margin improvements being driven by artificial intelligence.
Nevertheless, the Goldman Sachs team wrote that with profound generational technological changes such as artificial intelligence, "making judgments based on short-term cost and return economics will be futile." The focus will be on the long term. Goldman Sachs estimates that by the second half of 2025, generative artificial intelligence will begin to make a substantial contribution to industry growth.
Regarding NVIDIA, Hari said, "Their competitive position remains very strong, and we do believe that in the commercial chip field, NVIDIA is the preferred choice, even compared to custom chips, they also have an advantage in innovation speed."
On Monday, NVIDIA's stock rebounded by 3.54% to close at $106.47. NVIDIA has risen by 115% so far this year