Chipmakers Have Been "Dented But Not Deterred"
The generative AI (artificial intelligence) segment's darling, NVIDIA, has suddenly provided an outstanding opportunity to buy its shares on local dips below $760 at some point of a sharp technical correction last Friday, April 19. A situational sell-off in banking and energy stocks led to another round of decline in the S&P 500 broad market indicator, but only within a couple of percentage points during the day. However, when combined with a much smaller Super Micro Computer company's stock crashing by 23%, which announced its next earnings date without providing any preliminary financial results, as well as a simultaneously negative background from Taiwan Semiconductor Manufacturing, this caused a massive profit taking among NVIDIA shareholders.
The bullish camp could be a little tired from the lasting AI rally, yet a more than 20% price discount compared to the all-time highs at $974 in March, immediately sparked a wave of renewed optimism. As a first result, NVIDIA price added more than 5% after the weekend and surfaced above $800 per share. Growing, and then easing geopolitical concerns over the Israeli-Arabian conflict also contributed to this volatility on Wall Street. One may guess that ship has sailed, yet NVIDIA stock is still trading with a pretty large discount, which makes it an attractive speculative object.
Few private investors in this market may dare to expect a re-test of substantially deeper lows for NVIDIA at $600, while chances of exceeding $1,000 per share is still being considered by all major investment houses that continue to maintain their Buy ratings for the absolute world leader in graphics chip manufacturing, without even changing it to Hold or Overbought. We adhere to exactly this point of view, feeling NVIDIA and some of its satellite chip stocks, including AMD, as the best group of assets to pick up, using each and any lower price opportunity.
A shift change, starting from May and ending in mid-summer, is another possible scenario for NVIDIA and other semiconductor stocks, but only to extend these buying chances. GPU (graphic processing units) shortages may ease to some extent during the product transitional period from NVIDIA's "old" (2022) and H100-based Hopper generation of microarchitecture to the new one on the newest Blackwell chip series. "As Blackwell ramps, starting in August, it is likely to be in short supply for several quarters," Morgan Stanley client's note says. “This still leaves Hopper doing some heavy lifting through early 2025 as we still see the majority of revenue from Hopper until next year, and there is, of course, some anxiety about a Blackwell pause... but we simply are not hearing about that right now, as our contacts assure us that Hopper demand continues to grow and that the company can manage the transition to Blackwell effectively,” the reputable group added.
Meanwhile, the Bank of America said semiconductor stocks have been "dented but not deterred", as “we are only in quarter 3 of what is usually an average 10 quarter upcycle”. “We continue to believe some semis will face a headwind until June/July when it could become apparent estimates are about to go up again and we believe this is a buying opportunity for our buy-rated names,” Citigroup echoed. If so, the last but not the least is simply that nobody abolished the principle of doing things which most billionaire funds advised the crowd to do. We believe that buying dips in NVIDIA could make investing portfolios even stronger.
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