Nvidia stock is in a 'soul-searching' moment
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Investors’ voracious appetite for all things Nvidia ( NVDA ) might have cooled slightly of late, but the chill is temporary and the feast itself has only just begun, according to one Wall Street semiconductor analyst.
Shares of the market darling and Dow Jones Industrial Average component are down 8.5% in the past month. The Dow is down modestly in the past month, while the S&P 500 has tacked on a 0.5% gain.
Added Arya, “Look at any of these large magnificent whatever stocks. Each one of them has gone through this soul-searching moment periodically.”
That soul searching for Nvidia's stock, according to Arya, is related to several factors, including execution issues while trying to push through leading innovation and concerns around China exposure ahead of potential tariffs from returning president Trump .
“Some of these are company-specific forces,” Arya said of the issues, “and some of these are market forces.”
The switch to Nvidia's touted AI chip Blackwell hasn't been a seamless one, Arya explained, which has unnerved the bulls.
“The last two quarters have not been clean because they are going through the growing pains from one generation of product to a new generation,” said Arya.
Read more: Why Nvidia's Blackwell won the 2024 Yahoo Finance Product of the Year award
Blackwell, which was rolled out in March at the company's annual GPU conference, was hailed as Nvidia’s most powerful and innovative offering. But bringing the completed idea in the form of a product to the masses has proven itself to be more difficult.
“Since [March], what we have seen is execution issues keeping it out of the hands of customers,” he said.
Nvidia’s issues with mask and system-level configurations may be resolved, but “now we have a period of two quarters where it is very unlike Nvidia to have these question marks and where estimates have not gone up the way they were supposed to,” said Arya.
Still, there is plenty of upside to Nvidia's stock long term, contends Arya. Wall Street more broadly would agree — Yahoo Finance data shows 94% of sell-side analysts rate Nvidia's stock at a Buy or Strong Buy.
All eyes remain on the company as it makes more strides toward unleashing Blackwell into a market that is hungry for its offerings. Arya believes that Blackwell will rack up billions in sales in 2025. The stock could also see a near-term catalyst as Nvidia founder and CEO Jensen Huang takes the stage as a keynote speaker at CES 2025.
From there, “some of these gross margin issues will start resolving by the time the product is shipped for a quarter or two,” said Arya. Once they scale, “they are able to absorb a lot of those upfront costs.”
When Blackwell rolls out, it is also expected to boost generative AI to help us go to the next generation, “more easily monetized,” said Arya, who cautions against thinking Nvidia is at its peak now.
“It’s like saying the Apple App Store does not work before the App Store has even come on the phone,” he said.
Brian Sozzi fields insight-filled conversations and chats with the biggest names in business and markets on Opening Bid . You can find more episodes on our video hub or watch on your preferred streaming service .
Grace Williams is a writer for Yahoo Finance.
