Morgan Stanley analysts reaffirmed their confidence in Nvidia shares this Wednesday, despite a recent sharp drop in the technology market.
As reported AmbitOn Tuesday, Nvidia shares fell 7%, closing at $103.73, their lowest level since May. The bearish trend also affected other semiconductor-related stocks, with the iShares Semiconductor ETF falling 3.6% on the same day.
Although Morgan Stanley did not adjust its projections or target price for Nvidia, analysts indicated that the decline represents an attractive buying opportunity. They highlighted that the weakness in the market is being driven by exaggerated concernsalthough robust data continue to be observed in both the short and long term.
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Concerns that have contributed to the recent sale include clients’ capital expenditure budgets, competitive dynamics, export restrictions and supply chain issues. Despite these challenges, Morgan Stanley analysts believe the situation will resolve itself over time.
While spending on AI infrastructure has been patchy due to space and power constraints, demand for Nvidia GPUs remains strong. Analysts stressed that the durability of the H100 GPUs and the upcoming Blackwell series should mitigate spending concerns.
Competition from giants like Amazon, Apple and AMD have also affected Nvidia shares. However, Nvidia’s prominent position in the AI market and its ability to attract back customers who had switched to custom silicon alternatives reinforces its competitive advantage. Analysts said that even though the market is large and cannot be covered by a single Nvidia card, many customers are returning to Nvidia to take advantage of new opportunities.
Regarding export controls, especially related to China, Morgan Stanley analysts highlighted that Nvidia’s revenues from China are minimal, thus limiting the potential impact. In addition, the flexibility of Nvidia’s H20 product to meet export requirements ensures its presence in the market despite regulatory challenges.
In general, Morgan Stanley maintains a positive outlook on Nvidia shares, driven by robust demand and customer enthusiasm for Blackwell GPUs. Analysts noted that Nvidia’s visibility should improve as demand shifts from Hopper to Blackwell models, with lead times for the H100 being short and those for the H200 being longer.
With the valuation now looking more reasonable than it did a few weeks ago, analysts believe the market is overestimating some negative feedback on hyperscale, despite continued interest from customers in investing in the development of multimodal generative AI.
Source: Ambito
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