Even though Nvidia remains a top pick among research analysts at Bank of America and Vivek Arya due to its meteoric rise in mega-cap valuations, the stock may experience a significant pullback, he wrote on Thursday.
On February 21, the chipmaker is scheduled to disclose its earnings, and investors have not resisted expressing optimistic anticipations. Fourth-quarter buy-side estimates for Nvidia are $21.7 billion, which is 9% higher than the consensus estimate.
This reduces the likelihood that Nvidia will surpass expectations, leaving the company susceptible to an 11% implied post-earnings move, according to Bloomberg options analyst Arya. The share price as of Friday afternoon is approximately $740.
He wrote that while the decline might be significant, it would be fleeting. According to Arya, the reason why Nvidia fails to meet optimistic forecasts is due to supply-side factors, as opposed to more worrisome changes in demand and competition.
In the interim, volatility is anticipated to abate following the GPU Tech Conference hosted by Nvidia in mid-March.
“As reference NVDA stock was on average 6% higher (vs. SPX up 1%) T+1 days following the last six annual GTC events,” Arya reported.
Nvidia continues to be an alluring investment, as evidenced by its valuation of 35 times its price-to-earnings ratio, which is lower than the industry median.
The semiconductor manufacturer’s stock price has increased exponentially, enabling it to surpass the market capitalizations of Amazon and Alphabet and ascend to the third position on the S&P 500. The stock has increased by 250 percent through 2025, due to the fact that its technology has become an integral part in the advancement of artificial intelligence.
“One possible interpretation of this NVDA action, in our opinion, is a jumble of investor zeal, greed, and fear regarding everything AI-related.” Arya wrote, “We recognize those factors, but believe they understate the company’s solid execution and EPS revisions.”
