Morgan Stanley names NVDA a top pick, says sell-off is overdone

Morgan Stanley said the July sell-off in Nvidia has gone too far and it’s time for investors to buy the dip. The firm moved the stock back to “top pick” status in the chip space. “The selloff presents a good entry point as we continue to hear strong data points short term and long term, with overblown competitive concerns,” wrote analyst Joseph Moore. Nvidia shares are off 16% this month and 26% from their all-time high as investors rotated out of some of the big artificial intelligence tech winners and embraced laggards of the bull market — such as small caps. Moore also listed a large list of concerns hitting Nvidia lately including competition, possible export controls and valuation. Those worries are likely to “fade with time,” he wrote in the Wednesday note. NVDA YTD mountain Nvdia, YTD Nvidia shares rebounded Wednesday after peer AMD reported better-than-expected second-quarter earnings and revenue and said revenue this quarter would top expectations. Nvidia stock is still up more than 100% on the year and gained 6% in the premarket. Morgan Stanley rates Nvidia as overweight and has a $144 price target, which represents a 38% rally from Tuesday’s close. “What turns this selloff around?,” asks Moore in the note. “We frankly aren’t sure, but there are plenty of catalysts ahead – the prospect for multiple upward revisions, an increase to lead times and visibility as demand transitions to Blackwell, a strong answer to any competitive concerns, and the lack of other exciting stories in semis away from the AI theme, at a valuation that is suddenly much more reasonable than a few weeks ago.” Despite the sell-off, most of Wall Street remains firmly behind Nvidia with the average price target calling for a 30% rebound ahead.