Nvidia (NVDA) stock surged over 12% on Wednesday, buoyed by impressive guidance from peer AMD and a bullish recommendation from Morgan Stanley analysts.
This rally came after Nvidia experienced a decline of more than 20%.
AMD’s quarterly results, released late Tuesday, exceeded expectations, alleviating fears that the AI trade might be losing steam.
The company outperformed on revenue and earnings and offered a positive outlook for Q3, which reassured investors who had recently rotated out of Big Tech.
Tech giant Microsoft (MSFT) also contributed to the optimism by reporting increased spending on data center infrastructure in its latest quarterly results.
Suppliers of AI chips like AMD and Nvidia are poised to benefit from such investments by major tech firms.
“The fear of some of this momentum not lasting, or maybe fear that the revenue trajectory wouldn’t be there over the next 12 months or so — I think that is starting to ease,” CFRA senior equity analyst Angelo Zino told Yahoo Finance.
The positive sentiment extended to other chip stocks, with Broadcom (AVGO), Micron (MU), Taiwan Semiconductor (TSM), ASML (ASML), and Super Micro (SMCI) all rallying on Wednesday.
Nvidia’s stock was further boosted by a note from Morgan Stanley analysts led by Joseph Moore, who upgraded the stock to a ‘Top Pick’ following its recent dip from record highs in June.
Morgan Stanley highlighted the 25% sell-off in Nvidia stock as a buying opportunity, noting continued strong data points in both the short and long term despite concerns over business plans, competition, export controls, supply chain fears, and valuation.
Morgan Stanley maintained its Overweight rating and set a $144 price target for Nvidia.
Despite the recent volatility, Nvidia’s stock is still up more than 135% this year, significantly outperforming the Nasdaq’s 17% gain.
The company is scheduled to release its next quarterly report on Wednesday, August 28.
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