Nvidia's shares experienced a surge on Tuesday.
Nvidia's shares saw a significant surge on Tuesday, turning around its Monday slump. The tech giant, known for producing GPUs used in AI applications, saw its stock rise as much as 7.2%, with a 7.1% increase as of 1:30 p.m. ET.
The recent news surrounding AI advancements in China seemed to have cooled off, and investors appear to be regaining their confidence in Nvidia.
Post-Rout Recovery
Nvidia's stock took a considerable hit the previous day, plummeting 17% upon allegations that Chinese AI startup DeepSeek had developed an AI model, codenamed R1, which outperformed existing chatbots at reduced costs. Reportedly, R1 required fewer computing resources and was built using less advanced AI chips.
Investors, however, started to doubt these claims after analysts from Baird voiced their scepticism. Baird suggested that the alleged use of less advanced chips for R1's development was questionable. Furthermore, they believed that the demand for Nvidia's top-tier Hopper and Blackwell processors would persist.
In response to the market turmoil, Tigress Financial upgraded Nvidia to a strong buy, suggesting a potential 86% upward growth for investors, based on a new price target of $220. The analysts foresee robust demand from data centers, boosting Nvidia as the leading provider of data center GPUs.
Wedbush's Dan Ives considered the sell-off an opportune time to invest, arguing that no Global 2000 company would entrust their AI future to a Chinese startup like DeepSeek.
Nvidia's Response
Nvidia CEO Jensen Huang weighed in on the debate, applauding DeepSeek's AI advancement, but affirming that such developments would drive further AI adoption, actualizing demand for their processors.
Interestingly, the market turbulence led to a reduction in Nvidia's stock price. As of now, the stock is valued at 47 times earnings, although this figure is still higher than its three-year average of 82. Analysts collectively anticipate Nvidia's EPS to reach $4.45 by 2026, which equates to just 27 times next year's earnings. The reasonable valuation, considering its market prospects, appears appealing to some investors.
Upon seeing the scepticism from analysts like Baird, investors began to regain their confidence in Nvidia's finance, leading to a post-rout recovery of its stock. With analysts like Tigress Financial upgrading Nvidia to a strong buy and predicting an 86% upward growth, finance experts are seeing this as an opportune time to invest in Nvidia's money-making potential.
