Nvidia stock sell-off overdone, Goldman Sachs analyst says

Goldman Sachs isn’t spooked by Nvidia’s ( NVDA ) latest selloff.

Nvidia shed about $400 billion in market value last week after shares fell nearly 10% on Tuesday. Technology stocks were one of the biggest drivers of the S&P 500’s (^GSPC) worst start to a September since 1953, according to Bespoke Investment Group, although it recovered some of its losses on Monday.

Despite the selloff, Toshiya Hari, a senior analyst at Goldman Sachs, maintained a Buy rating on the chip giant. When asked if the selloff in Nvidia stock was overblown, Hari said, “Yes, we are.”

“Recent performance has not been great, but we remain positive on the stock,” Hari told Yahoo Finance at the Goldman Sachs 2024 Communacopia and Technology Conference. “First, demand for accelerated computing continues to be very strong. We tend to spend quite a bit of time on the hyperscalers—the Amazons, Googles, Microsofts of the world—but notice a broadening of the demand profile. in enterprise, even in sovereign states”.

Nvidia’s selloff began when the company’s better-than-expected earnings on Aug. 28 just weren’t good enough for Wall Street. While Nvidia’s revenue beat Wall Street expectations by 4.1%, it was the company’s lowest margin since the fourth quarter of fiscal 2023.

The big debate surrounding Nvidia is whether its earnings momentum is sustainable. Hari said investors are wondering if that will be the case not only for 2025 but also for 2026.

Investor sentiment on artificial intelligence has “oscillated nearly 180 (degrees)” since the start of 2023, Goldman’s equity research team wrote in a recent note. Investor patience is wearing thin and they want to be shown – not told about – AI-driven revenue streams and profit margin improvements.

Still, the Goldman team wrote, with a profound shift in generational technology like AI, “it would be pointless to judge based on short-term costs and economic returns.”

The focus is on the long game: Goldman estimates that generative AI will begin to materially contribute to the sector’s growth by the second half of 2025.

“I think their competitive position continues to be very strong,” Hari said of Nvidia. “We think that in commercial silicon, Nvidia is the best fit, and even against custom silicon, they have the edge in terms of pace of innovation.”

Nvidia CEO Jensen Huang is scheduled to speak at Wednesday morning’s conference call.

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