Nvidia (NVDA) Stock Soars 10% On Buy Call From Morgan Stanley

Nvidia Corporation (NVDA) experienced a significant rebound in its stock price on Wednesday, July 31, following a Top Pick rating reassignment from Morgan Stanley. The chipmaker witnessed a robust 10% rally in its stock after a massive decline in Tuesday. Moreover, Morgan Stanley analysts have indicated that it’s a good time to buy Nvidia stock.

Morgan Stanley On Nvidia

The sharp decline in Nvidia stock on Tuesday was part of a broader market sell-off, triggered by concerns surrounding customer capital spending budgets, competitive dynamics, export controls, and supply chain issues. However, Morgan Stanley analysts remain optimistic about the tech firm’s long-term prospects.

Furthermore, the analysts acknowledged the current challenges, but they believe these issues will diminish over time. They emphasized that customer spending on AI infrastructure has been inconsistent due to space and power constraints. Nevertheless, the demand for the company’s GPUs, particularly the H100 series, remains strong.

Additionally, the analysts highlighted the resilience of these GPUs and the upcoming Blackwell series. They suggested that “those spending concerns seem premature.” Meanwhile, competition from tech behemoths like Amazon (AMZN) and Apple (AAPL) has also put pressure on Nvidia’s stock. However, Nvidia’s central role in the artificial intelligence market.

In addition, its ability to attract customers back from custom silicon alternatives underscore its enduring competitive edge. “This is a large market and is not going to be served by a single Nvidia card, but we are hearing multiple instances of customers who have invested in custom silicon or alternatives coming back to Nvidia for upside,” the analysts said.

Regarding export control concerns, particularly with China, the analysts noted that while there are risks related to geopolitical factors, Nvidia’s minimal trailing revenue from China reduces potential impacts. They also pointed out the adaptability of the H20 product to meet export requirements. This ensures continued market presence despite regulatory hurdles.

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NVDA Stock Rally

Overall, Morgan Stanley maintains a positive outlook for Nvidia stock, driven by robust demand indicators and strong customer enthusiasm for the Blackwell GPUs. Additionally, the analysts explained that visibility will improve as demand shifts from Hopper to Blackwell, with the constraint moving back to silicon.

They noted, “H100 lead times are short, but H200 lead times are already long, and Blackwell should be even longer.” Morgan Stanley’s reassignment of Nvidia stock as a Top Pick comes at a time when the company’s valuation appears “much more reasonable than a few weeks ago.”

They believe the current market is “taking a very glass half-empty view of some of the hyperscale comments, where there is a clear desire on the part of customers to continue to commit resources to developing multi-modal generative AI.”

The strong trading session on Wednesday, where the NVDA stock gained over 10%, reflected investor confidence in the bank’s reassessment. At press time, the NVDA stock rallied by 10.18% to $114.27 during the day, according to Nasdaq. This marks a significant recovery as the Nvidia stock plummeted 6.95% on Tuesday, closing at $103.73.

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