Nvidia shares post weekly loss as Wall Street sees 'urgent demand' keeping chip trade healthy

Nvidia (NVDA) stock closed Friday with a 2% weekly loss as investors continued to sort out what has been the hottest trading session of the year for the past few weeks.

But Wall Street analysts this week remained confident in the long-term prospects of Nvidia, which is now down about 20% over the past month and more than 25% from its record closing high.

Earlier this week, analysts at Piper Sandler pointed to a “huge opportunity” to buy Nvidia, AMD (AMD) and ON Semiconductor (ON) in the wake of recent sector sell-offs.

Some analysts also took the opportunity to upgrade the stock during this sell-off.

“I think things will be fine by 2025,” Antoine Chakaiban, a technology infrastructure analyst at New Street Research, told Yahoo Finance on Thursday. “We know roughly how much we need.” [hyperscalers] “Capital spending is expected to grow. Plans are already in place.” New Street upgraded Nvidia shares to “buy” this week with a $120 price target.

Chipmaker TSMC (TSM), a supplier to Nvidia, reported a 45% year-over-year increase in sales in July on Friday — a sign that demand for artificial intelligence remains strong.

“We still feel there is urgent demand across the board, and this mitigates the risk of shipments being held up while customers wait for the next generation of chips to become available in large quantities,” Shakaiban said.

The so-called mega-caps — Microsoft (MSFT), Meta (META), Amazon (AMZN), and Alphabet (GOOG, GOOGL) — have been consistent in recent earnings reports in their commitment to investing in AI. Much of that investment is flowing directly to Nvidia.

Investors are likely to reconsider AI-related names as they look to [semiconductors] “Cloud spending remains the only area where there is a pick-up in terms of customer spending, as evidenced by the capital spending increases by several of the giants during this earnings period,” Jefferies analyst Blaine Curtis told Yahoo Finance on Friday.

Talk of a possible delay to the launch of Nvidia’s next-generation Blackwell chip added to pressure on the stock earlier this week. Analysts say a two-month wait before the chip’s launch will be no small feat, but it won’t be enough to move Wall Street’s expectations.

Nvidia’s delays are “real, but not a game changer,” Curtis’ team said in a recent note. The company is scheduled to report its quarterly results in late August.

Analysts and strategists who look at the broader markets see the recent slowdown in AI trading as an opportunity.

Keith Lerner, chief marketing strategist at Truist Advisory, upgraded the technology sector to “overweight” on Thursday after it fell 12% from its mid-July peak, with semiconductor stocks down about 20%. Lerner noted that despite the decline in prices for these stocks, future earnings estimates for the technology sector continue to rise.

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“This suggests that the recent setback was due to crowded positioning rather than a shift in fundamentals,” Lerner wrote in a note to clients.

“Furthermore, in a sluggish economic environment, we expect investors to return to technology given some of the lasting tailwinds from AI and its strong growth prospects. Furthermore, during the current earnings season, we have seen continued upward trends in capital spending towards AI.”

But recent shifts in sentiment don’t necessarily resolve the looming question that investors will want answered over time — how do these massive investments in AI ultimately pay off?

“When it comes to technology, what’s very clear is not only the macroeconomic picture but also the fact that people want to see… evidence that GenAI trading is actually leading to positive outcomes,” Luke Bars, managing director at Goldman Sachs Asset Management, told Yahoo Finance on Friday.

“We have to be careful and let things play out for the next year or two.”

Ines Ferry is a senior business reporter at Yahoo Finance. You can follow her on X on @ines_ferre.

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