Last week, investors started rotating out of hot chip stocks like Nvidia (NVDA 0.18%). That led to the stock's first losing week in about two months. But one Wall Street analyst is looking beyond the sector rotation and believes investors should still be buying shares of the artificial intelligence (AI) chip leader.
Jefferies analyst Blayne Curtis doesn't think the powerful AI rally has come to an end. In a report released Sunday, he maintained a "buy" rating and raised his price target on Nvidia from $135 to $150 per share. That represents a 25% gain from recent levels. It comes after Nvidia stock has pulled back from its recent record high, dropping more than 12% in just the last week.
Nvidia is the leader
While many stocks in the chip sector have recently pulled back, Curtis still thinks Nvidia is the undisputed leader among AI-related companies. The analyst summed up his thoughts this way:
Nvidia is in control of the ecosystem on both the hardware and software front and their current cadence of new generations should make that lead only grow further.
The reason for Curtis' optimism is that Nvidia isn't just dominating in hardware sales of its graphics processing unit (GPU) chips. Nvidia is continuing to launch next-generation hardware, as well as software that could actually extend its lead in the field.
For example, Nvidia's CUDA (Compute Unified Device Architecture) software kit helps developers broaden applications on different types of GPU-accelerated embedded systems. Curtis also pointed out that Nvidia now offers NVL72 liquid-cooled rack systems. That's another innovation in AI infrastructure that contains its own new Blackwell GPUs.
Investors shouldn't panic
The investor takeaway is that Nvidia has a long runway for growth in a powerful, emerging sector. But stocks don't just go up continuously, which means any price correction like the one Nvidia shares are experiencing now can be nerve-wracking for owners.
There's nothing wrong with taking some profits if it helps one sleep at night. But holding, or even adding, during this share price swoon could pay off nicely in the future.
