Nvidia ( NVDA ) shares closed Friday with a weekly loss of 2% as investors continued to sort through what has been a challenge in recent weeks for the hottest trade of the year.
But Wall Street analysts this week remained confident about the long-term prospects for Nvidia, which is now down about 20% in the past month and more than 25% away from its all-time high.
Earlier this week, analysts at Piper Sandler called a “huge opportunity” to buy Nvidia, AMD (AMD) and ON Semiconductor (ON) following the sector’s recent sell-off.
Some analysts also took the opportunity to upgrade the stock during this sell-off.
“I think things are looking pretty good for 2025,” Antoine Chkaiban, technology infrastructure analyst at New Street Research, told Yahoo Finance on Thursday. ‘We know approximately how much [hyperscalers] expects capital investments to increase. The plans are already in place.” New Street upgraded Nvidia to a buy this week with a price target of $120.
On Friday, chipmaker TSMC (TSM), a supplier to Nvidia, posted a 45% year-over-year sales increase in July – a sign that demand for AI remains strong.
“We still feel urgent demand across the board, and that reduces the risk of a lull in shipments while customers wait for the next generation of chips to become available in volumes,” Chkaiban said.
The so-called hyperscalers – Microsoft (MSFT), Meta (META), Amazon (AMZN) and Alphabet (GOOG, GOOGL) – remained consistent in their commitment to AI investments during recent earnings reports. And a large part of these investments flows directly to Nvidia.
“Investors are likely to reconsider AI-enabled names as they come in [semiconductors] This remains the only area where customer spending is flowing, as evidenced by the increase in capital expenditures by multiple hyperscalers this earnings period,” Jefferies analyst Blayne Curtis told Yahoo Finance on Friday.
Talks of a possible delay for Nvidia’s next-generation Blackwell chip added pressure on shares earlier this week. A two-month wait for the chips wouldn’t be insignificant, analysts say, but it still wouldn’t be enough to change Wall Street expectations.
Curtis’ team stated in a recent note that Nvidia’s delays are “real, but not a position changer.” The company will announce quarterly results at the end of August.
Analysts and strategists looking more broadly at the markets also see the recent cooldown in AI trading as an opportunity.
Truist Advisory’s chief marketing strategist Keith Lerner upgraded the technology sector to Overweight on Thursday, following a 12% decline from its mid-July peak, while semiconductors fell nearly 20%. Lerner noted that despite the decline in these stocks, technology’s future earnings expectations continue to rise.
“This suggests that the recent setback was due more to busy positioning than a shift in fundamentals,” Lerner wrote in a note to clients.
“Additionally, we expect investors to return to technology in a cooling economic environment, given the long-term tailwinds coming from artificial intelligence (AI) and its premium growth prospects. Additionally, we have seen capital expenditure trends toward AI continue to increase during the current earnings season.”
But the recent shifts in sentiment do not necessarily answer the looming question that investors will want to see answered over time: how will these massive AI investments ultimately pay off?
“When it comes to technology, it’s not just the macroeconomic picture that’s very clear, but also the fact that people want to see proof that GenAI trading actually leads to positive outcomes,” said Luke Barrs, managing director at Goldman Sachs Asset Management . , Yahoo Finance said on Friday.
“We just have to be careful and let it happen over the next two years.”
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X @ines_ferre.
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