CNBC Upgrades Nvidia to Buy After 9% Post-Earnings Drop
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- CNBC's Investing Club upgraded Nvidia back to a 1 (buy-equivalent) rating after shares fell just over 9% on Thursday and Friday, despite a strong quarterly report and even stronger guidance issued Wednesday night.
- Nvidia's forward price-to-earnings multiple has compressed to 22 times — the lowest since last April's tariff announcement — down from the mid-30s in August, even as AI spending accelerates.
- Morgan Stanley semiconductor analysts named Nvidia their top pick, replacing Micron, writing that 'for the last two quarters NVIDIA has not moved while business has continued to strengthen' and expects concerns to 'turn to 2027 enthusiasm in the coming months.'
- Morgan Stanley also flagged that hyperscalers are placing three-year orders on memory suppliers with full prepayment, in some cases 'receiving 100% of 2028 revenue this quarter, with volumes at multiples of current levels,' evidence that AI capex will keep rising for years.
- Nvidia is designing a new inference-focused AI chip using technology from Groq, under a $20 billion non-exclusive licensing deal signed late last year, aimed at countering custom chips from large data center operators.
- Nvidia has traded sideways at roughly the same price since August — a seven-month consolidation — even as the article argues the fundamentals around AI spending have only strengthened.
- CEO Jensen Huang teased the Groq-derived product on the earnings call, drawing the Mellanox parallel: 'As we did with Mellanox, we will extend Nvidia's architecture with Groq's innovations to enable new levels of AI infrastructure performance and value.'
Why it matters: Nvidia's 9% two-day sell-off after a strong quarter and guide left the stock at 22x forward earnings — its cheapest since April's tariff shock — and Morgan Stanley's concurrent top-pick upgrade adds Wall Street weight to the thesis that the stagnation misprices a 'Fourth Industrial Revolution' capex cycle that hyperscalers are already locking in with multi-year prepaid orders.
