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(Bloomberg) — Artificial intelligence darling Nvidia Corp. is facing near-term headwinds that are making its valuation look compelling, giving investors an attractive buying opportunity, according to Bank of America Corp.
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Shares of the chipmaker are down about 15% from its late August earnings release, when the company failed to live up to investors’ lofty expectations. The downward pressure could continue in the coming weeks as Nvidia grapples with production issues surrounding its much-awaited Blackwell chips, recent regulatory scrutiny, more cautious investor sentiment toward the AI trade generally, and overall market volatility.
Combined, these could create an “enhanced” buying opportunity for investors, as Nvidia’s stock slips within the lowest quartile of valuation seen in the past five years, wrote BofA analysts led by Vivek Arya.
“The key fundamental recovery catalyst will likely be supply chain data points over the next several weeks, confirming the readiness of new Blackwell product shipments,” the analysts said in their Sept. 4 note.
Nvidia shares have been on a rollercoaster ride in recent months, adding and erasing hundreds of billions of dollars in market value since a record high in June. That’s moved the broader S&P 500 Index, where Nvidia is the third-largest stock behind Apple Inc. and Microsoft Corp. So far this year, the stock is the top performer on the S&P 500, up about 115%.
Shares of Nvidia rose as much as 3.2% in intraday trading on Thursday, but are set to lose more than 10% overall this week, putting them on track for their worst week since April.
Despite the lack of positive catalysts in the near-term, the stock should be supported over the next few years as companies build out their AI capabilities using Nvidia chips, including the firm’s Blackwell and Hopper lines.
“The tech industry will give itself at least another 1-2 years of intense buildout of NVDA Blackwell chip with its 4x lift in AI training and 25x+ lift in inference,” reads the BofA report. “Efforts thus far with the first wave of large language models (LLM), using NVDA Hopper was just the teaser.”
BofA reiterates that Nvidia is a top sector pick and buy-rated stock. The firm’s $165 price target implies about 55% upside from Wednesday’s close.
Wall Street is overwhelmingly positive on shares of the chipmaker. Nvidia has 66 buy ratings, 8 holds and no sells, according to data compiled by Bloomberg.
–With assistance from Bre Bradham and Ryan Vlastelica.
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