The Stock Price of NVIDIA Has Been 'Brutalized.' Here is What's Going on

Can Nvidia’s “Brutalized” Stock Stage a Comeback?

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Shares of Nvidia Corp. and Broadcom Inc. have faced significant declines this year, but Bernstein analyst Stacy Rasgon suggests both stocks could present appealing opportunities for patient investors. In a note released late Monday, Rasgon pointed out a disconnect between investor anxiety about artificial intelligence (AI) spending and the actual behavior of major tech customers.

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While investors remain cautious, companies involved in AI spending appear to be moving forward aggressively. Rasgon highlighted that Nvidia’s current valuation—about 20 times its projected earnings over the next 12 months—is attractive, especially given the continued strong demand for its products. He views this valuation as a low point for Nvidia despite the broader market’s concerns.

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Meanwhile, Broadcom is gearing up to expand its application-specific integrated circuits (ASICs) in the latter half of the year, a development Rasgon sees as a growth driver. In addition to its chip business, Broadcom’s software division is becoming a more substantial contributor to revenue, offering another avenue for long-term growth.

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Despite their future potential, both Nvidia and Broadcom have struggled this year, with each stock declining about 20% year-to-date.

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Beyond the AI heavyweights, Rasgon also pointed to Qualcomm Inc. as a stock worth considering. Although Qualcomm is not typically grouped with AI leaders, the company stands to benefit as more AI applications transition to consumer devices. Unlike Nvidia and Broadcom, Qualcomm’s stock has managed to post a small gain this year, despite facing headwinds.

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One concern for Qualcomm is Apple Inc.’s entry into the modem business. As one of Qualcomm’s major customers, Apple’s move to develop its own modem technology could reduce its reliance on Qualcomm’s products. However, Rasgon believes this risk is already reflected in the stock price, which has shown resilience despite these competitive pressures.

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While some investors have started to regain confidence in analog chip stocks after a challenging period, Rasgon remains cautious. He is not yet ready to declare that these stocks have hit their lowest point. Specifically, he expressed concerns about the industrial market if a U.S. recession takes hold, especially since the automotive sector is showing signs of weakness. High valuations in the analog chip sector add to his reservations.

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When it comes to Advanced Micro Devices Inc. (AMD) and Intel Corp., Rasgon remains neutral. He holds market-perform ratings on both companies, meaning he does not expect either stock to outperform or underperform relative to the market.

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Rasgon sees limited upside for AMD, noting that the company lacks a compelling AI growth narrative compared to its peers. Although AMD is a key player in the semiconductor space, it has not established itself as a major force in AI technology, limiting its appeal for investors seeking exposure to that growth area.

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As for Intel, its stock has been volatile this year, driven by speculation surrounding potential acquisitions or other strategic moves. However, Rasgon and his team are not convinced that these factors present a strong enough reason to invest in the stock. They remain skeptical about trading Intel purely based on takeover rumors or other speculative events.

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In summary, Rasgon believes that Nvidia and Broadcom offer attractive long-term opportunities for investors willing to endure short-term volatility. Qualcomm also stands out as a solid option, particularly as the market may have already priced in the risks associated with Apple’s modem ambitions.

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However, he urges caution on analog chipmakers due to ongoing concerns about the industrial and automotive sectors, especially if a U.S. recession materializes. Similarly, he does not see a compelling case for owning AMD or Intel, given their respective challenges and limited growth stories.

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As AI spending remains a key market focus, the disparity between investor concerns and actual corporate behavior could present opportunities. Yet, the broader semiconductor landscape remains mixed, with specific risks tied to economic conditions and company-specific dynamics shaping the outlook for various chip stocks.

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