Nvidia shares have been suffering since the beginning of the year. But the consensus among Wall Street analysts remains super bullish.
Down almost 30% year-to-date, Nvidia has been suffering from headwinds mainly in the gaming sector. But the tone among Wall Street experts remains super bullish for the long term.
Bank of America analysts recently reinforced their bullishness on Nvidia stock ahead of the recent sell-off and forecast a strong upside ahead. Let's look further.
BoA Is Super-Bullish on NVIDIA
Bank of America Securities analyst Vivek Arya recently reiterated his bullishness on Nvidia. He has set a buy recommendation with a price target of $375. This implies a potential upside of 69%, based on the recent price of $222.
According to Arya, Nvidia's recent weakness — including the sharp decline we've seen since the end of March — is exaggerated. Investors are worried about headwinds linked to the gaming business, wich accounts for 44% of Nvidia's sales. The company may face a slowdown in demand in Europe and China due to the war in Russia and the COVID lockdowns.
Also, Ethereum is switching to a proof-of-stake model. Because this method of validating transactions doesn't require graphics cards, this could impact Nvidia's business.
However, Arya thinks that investors are overlooking more favorable trends, such as the strength of Nvidia's data center business and professional design visualization; the upcoming new 2H gaming-based Hopper product cycle; and the low inventory of gaming channels.
Has the Semiconductor Industry Peaked?
According to some Wall Street experts, growth in the PC and gaming hardware segments is expected to slow in 2023.
Some Wall Street firms like Morgan Stanley and Barclays have beendowngradingstocks like HP, AMD and Dell as recently as March. But this has less to do with the recent financial performance of these companies than with their longer-term outlook.
Goldman Sachs also recently gave its opinion regarding the slowdown in the semiconductor space. According to Goldman's team, the macroeconomic environment is likely to deteriorate, with skyrocketing inflation and rising interest rates negatively impacting consumer behavior.
Because Nvidia is one of the biggest players in this industry, its performance has naturally influenced the pessimism of big Wall Street firms. That's especially the case, considering the high multiples that the stock currently trades for. Nvidia's P/E is currently 49 times, more than 152% above the semiconductor sector average.
However, the recent slowdown in the PC, gaming, and crypto markets tend to be a momentary headwind and not a matter of lack of demand. Sectors such as data center, gaming, and autonomous vehicles, in which Nvidia is a major player, should continue to be in a super demand trend for the long term.
Because Nvidia has a business with robust margins, cutting-edge technology, and fast development pace in very promising sectors, the bullish tone for the long term in Nvidia should remain the consensus on Wall Street.
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