Nvidia Leads Tech Rebound Despite AI Investment Worries and Chip Delays
AInvestTuesday, Aug 13, 2024 1:00 am ET
2min read
BAC --
BOOM --
NVDA --
UBS --
The recent months have seen significant volatility in the major tech stocks due to investor concerns about the tangible results of AI investments and increasing fears about a potential recession in the U.S. economy. Nvidia (NVDA.US), a key beneficiary of the AI boom, witnessed a decline of over 15% last month, while the Philadelphia Semiconductor Index saw a nearly 18% drop in the same period.

Despite recent downturns, Nvidia rebounded strongly on Monday, closing with more than a 4% gain and leading the tech sector higher. Leading Wall Street firms, including Bank of America and UBS, continue to express optimism about Nvidia, suggesting that the recent downturn in semiconductor stocks is an overreaction.

Bank of America analyst Vivek Arya highlighted Nvidia as one of the top picks for a rebound, projecting a recovery in the semiconductor sector by the end of 2024. Arya noted that as seasonal downturns abate, the semiconductor industry could see a resurgence in the fourth quarter. Broadcom (AVGO.US) and KLA Corp. (KLAC.US) are also likely to benefit from this rebound due to their profitability in their respective markets.

Arya warned that volatility might persist until Nvidia reports its next earnings on August 28 and into September, typically the worst-performing month for semiconductor stocks. He stressed that while recent upward trends in semiconductor stocks have lasted only four quarters, historical upsurges have generally spanned nearly ten quarters.

Concerns over Nvidia’s stock have been exacerbated by worries about sales delays for its Blackwell chip. Due to a design flaw, Nvidia has informed customers that the release of the new Blackwell B200 chip will be postponed by at least three months, potentially delaying mass shipments until Q1 of next year. Originally slated for mass production by October 2024, any delays pushing into April 2025 could directly impact quarterly revenues.

Responding to these concerns, Nvidia stated that strong demand for its Hopper chip and ongoing plans for Blackwell production suggest that even with the B200 delay, the impact on overall revenue might be minimal due to sustained demand for Hopper chips.

Wall Street analysts echo this sentiment, with KeyBanc Capital Markets analyst John Vinh suggesting that supply or timing issues could be overlooked if demand remains robust. He believes Nvidia will continue to surpass and raise profit guidance, indicating that demand concerns should not pose a significant issue in the near term.

Timothy Arcuri of UBS expects Blackwell chip shipments to be delayed by no more than four to six weeks. He maintains a "buy" rating on Nvidia with a target price of $150, underlining that primary customers should receive the first batch of Blackwell chips by April 2025. Arcuri also believes that Nvidia's earnings growth potential is currently underestimated by the market, citing customer discussions that suggest substantial growth might continue into 2026 rather than peaking in 2025.

As investors await Nvidia’s upcoming earnings report, it remains crucial to monitor the broader market trends and Nvidia's strategic responses to any delays or market shifts. The resilience and adaptability of Nvidia in navigating these challenges will be instrumental in determining its future trajectory in the volatile semiconductor sector. The continued strong demand for AI chips and Nvidia’s strategic moves in production and client relations will be key factors influencing its stock performance in the upcoming quarters.
Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.