Nvidia (NVDA +1.16%) is down roughly 30% below its previous high. This isn't a new experience for the stock. Since its initial public offering (IPO) in 1999, Nvidia's share price has plunged by that amount or more from its previous peak eight other times.
Importantly, Nvidia eventually rebounded strongly every time in the past after a steep sell-off. With that in mind, it's probably not surprising that Wall Street is screaming to buy Nvidia stock hand over fist right now. But should you listen?
NASDAQ: NVDA
Key Data Points
A loud chorus for Nvidia
Nine analysts have issued ratings on Nvidia in the second half of April. Eight recommend buying the stock. Raymond James views Nvidia as a "strong buy."
The lone outlier who didn't join in the loud chorus for Nvidia was D.A. Davidson. This financial services company is headquartered far away from Wall Street in Great Falls, Montana. But even D.A. Davidson has a "neutral" recommendation for Nvidia and a price target that reflects an upside potential of 15%.
Yahoo! Finance scores analysts based on the accuracy of their stock ratings and price targets. Guess how many of the top 10 analysts on this scorecard recommend buying Nvidia stock? Pat yourself on the back if your answer was all of them.
The average analysts' 12-month price target for Nvidia is a whopping 58% higher than the current share price. Some top analysts are even more bullish. For example, Cantor Fitzgerald and Rosenblatt both recently came out with a price target of $200, reflecting an upside potential of roughly 92%.
Behind the enthusiasm
Wall Street's consensus is that Nvidia is a great stock to buy hand over fist right now. Why such enthusiasm? Many analysts remain convinced that Nvidia's growth prospects will continue to be strong.
For example, Raymond James analyst Srini Pajjuri recently wrote to clients that Nvidia's forward price-to-earnings multiple, which was then at 27x, already reflects risks related to exporting H20 GPUs to China. Pajjuri noted that the company's Blackwell GB200 chip shipments are increasing with the new GB300 chips on track to begin shipping in Nvidia's fiscal third quarter. He predicted these factors "should help sustain momentum through the year."
What about worries that Amazon, one of Nvidia's biggest customers, is hitting the pause button on leasing new space for data centers? Sure, Wells Fargo suggested this was happening in a report to its clients. However, Kevin Miller, vice president of global data centers for Amazon Web Services, addressed the issue head-on in a recent LinkedIn post:
Wall Street doesn't appear to be overly concerned about rising competition for Nvidia, either. That's not surprising to me, considering what former Intel CEO Pat Gelsinger recently said in an interview with Yahoo! Finance's Brian Sozzi. Gelsinger told Sozzi that it would be very difficult for any rival to knock Nvidia off its perch. He said, "I've always viewed that there's sort of this 10x rule, where if you're not 10x better than the king, you're not going to displace that." No competitor has chips anywhere close to being 10x better than Nvidia's most powerful GPUs.
Should you listen to Wall Street?
Should you listen to Wall Street about buying Nvidia stock? Yes and no.
No investor should buy any stock solely because an analyst recommended it. It's always important to do your own research. Your investing goals or risk tolerance could cause you to avoid a stock that Wall Street loves -- and that's OK.
However, I think Wall Street is right about Nvidia. The latest pullback presents a great buying opportunity for long-term investors. When Nvidia has traded at such a discount in the past, it was something worth screaming about.
