Businesses have been spending big on artificial intelligence (AI), and that has lent a particular edge to businesses like Nvidia (NVDA), as the chip maker provides the infrastructure needed to make AI happen to begin with. Though some of that has slowed a bit in recent months, there are signs of another resurgence afoot. The news gave Nvidia a fractional boost in Wednesday’s trading.
While there has been some pullback, there are also clear signs that spending may be coming back. And that should continue to drive interest in chips like those produced at Nvidia. Indeed, Voya Investment Management’s lead portfolio manager, Erik Swords, noted that we’re “…nowhere near close to finishing the build-out of AI infrastructure, and that gives you a very good line of sight in terms of the growth you can expect over the coming years.”
Many are looking to next week, when Nvidia reveals its earnings, to highlight the current levels of chip demand. Analysts expect earnings per share to come in at $0.64.
A Coming Chip Revival?
Chip stocks have taken their lumps since June when Nvidia hit its peak and then began retracing. But, much like Erik Swords, a growing number of investors are looking to get back in. One of the key factors that kept investors out, noted a Barron’s report, was high chip stock valuations. The very real potential of recession—which may actually have hit already—also came into play.
But as we reconsider the landscape, there are signs that life is coming back into the chip sector, and that should, in turn, mean further gains for Nvidia and those like it. In addition, five-star Deutsche Bank analyst Ross Seymore noted that even if the Blackwell platform is delayed at Nvidia, it likely would not have much impact on the near-term outlook.
Is NVDA a Good Stock to Buy Right Now?
Turning to Wall Street, analysts have a Strong Buy consensus rating on NVDA stock based on 37 Buys and four Holds assigned in the past three months, as indicated by the graphic below. After a 180.53% rally in its share price over the past year, the average NVDA price target of $144.17 per share implies 12.7% upside potential.
