Chip stocks rebound as NVIDIA gains despite downgrade

Baird lowered NVIDIA’s rating from Outperform to Neutral and reduced its price target from $500 to $200. Other firms, including Morgan Stanley and Bank of America, have also expressed caution. However, a strong performance from CoreWeave (NASDAQ:CRWV) has spurred renewed interest in AI-related investments.

The broader AI chip sector is experiencing a resurgence. Advanced Micro Devices (NASDAQ:AMD) saw a larger increase than NVIDIA, while Broadcom (NASDAQ:AVGO) also advanced.

Baird’s downgrade cited concerns about diminished visibility, leading the firm to postpone its 2027 data center forecasts for NVIDIA. Supply constraints and potential softening in demand are also contributing factors. Furthermore, uncertainty surrounding NVIDIA CEO Jensen Huang’s continued leadership, following reports and a board investigation, is weighing on investor sentiment. Despite these concerns, Baird acknowledged that demand for NVIDIA chips still outstrips supply.

Morgan Stanley removed NVIDIA from its top semiconductor pick list due to the stock’s decline exceeding 25% since October, triggering its stop-loss policy. However, the firm maintained its Overweight rating and $300 price target. Bank of America also removed NVIDIA from its U.S. 1 List on November 10.

CoreWeave’s strong quarterly results fueled the AI rally, benefiting chipmakers, memory manufacturers, and data center companies. Goldman Sachs analyst James Schneider deemed AI stocks to be “clearly in oversold territory” and highlighted NVIDIA, Broadcom, and AMD as top choices.

Schneider believes NVIDIA and Broadcom are undervalued, trading at 12x and 13x, respectively, based on a projected 2028 baseline. AMD is considered “very attractive” for growth, although its valuation is less compelling.

NVIDIA offers a comprehensive AI platform including GPUs, networking, systems, and the CUDA software ecosystem. AMD combines Instinct GPUs with EPYC server CPUs and utilizes its open ROCm software. Broadcom collaborates with AI labs like Anthropic and OpenAI, and provides Ethernet networking and VMware-based infrastructure software.

NVIDIA is scheduled to release its Q3 FY2027 results on November 17. Investors will be looking for confirmation that the AI investment cycle remains robust and that the company can meet its $108 billion revenue forecast. The rebound also occurs as Chicago Fed President Austan Goolsbee expressed concern over recent inflation data.