Nvidia stock (NVDA) rose as much as 5% on Monday, leading a rally in tech stocks as Wall Street continued to debate whether a recent slump across the semiconductor sector has gone too far.
On Monday, Bank of America analyst Vivek Arya noted Nvidia is one of the firm's top "rebound" picks amid what he expects to be a comeback for semiconductors to end 2024.
"Our base case remains for a [semiconductor] rebound likely in Q4 as seasonal headwinds dissipate," Arya wrote in a note to clients.
Arya noted that Broadcom (AVGO) and KLA Corporation (KLAC) could also benefit from a rebound as they are the "most profitable vendors in their respective end-markets," in addition to Nvidia.
The PHLX Semiconductor index (^SOX) is down nearly 18% in the last month, while Nvidia stock is off more than 15% over the same time period. The sector has been swept up in a rotation by market participants out of large-cap technology.
Arya reasoned that volatility is likely to continue through Nvidia's next earnings release on Aug. 28 and into September, which is historically the worst month of the year for semiconductor stocks. Arya noted that the current upward trend in semiconductor stocks has only been underway for four quarters, while prior runs have typically lasted for closer to 10 quarters.
Nvidia stock, in particular, has been under pressure amid growing concerns about the distribution of its Blackwell chip. Last week, The Information reported Nvidia's upcoming next-generation AI chips would be delayed by three months, potentially impacting big customers like Microsoft (MSFT), Alphabet (GOOGL, GOOG), and Meta (META).
Nvidia then issued a statement stating its next-generation Blackwell chip production "is on track to ramp" in the second half of the year. And Wall Street analysts believe the issue will be resolved.
"If it's really a supply or timing issue, I think most investors are willing to kind of look through that," KeyBanc Capital Markets equity research analyst John Vinh told Yahoo Finance. "If it was a demand issue, I think we'd have other issues here with Nvidia. But from our perspective, we think they'll beat and raise [earnings guidance]. We don't think near-term demand is going to be an issue at all."
UBS analyst Timothy Arcuri maintained his Buy rating on the stock and a $150 price target in a note to clients on Monday while also remarking that he believes Blackwell customer volume shipments are likely delayed four to six weeks "at most."
"Lead customers should have first Blackwell instances stood up in April 2025 timeframe," Arcuri wrote. "AI labs are still upsizing and lengthening their instance commitments and enterprises are rapidly growing as a proportion of the demand mix — both bullish indicators."
Additionally, Arcuri argued the market may be underestimating Nvidia's future earnings growth. For now, Arcuri believes the market is currently pricing in peak earnings growth for Nvidia in 2025. But Arcuri argued that 2026 "seems more likely to be up again given our customer discussions."
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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