According to Joseph Moore, the lead analyst at Morgan Stanley, investors who missed out on Nvidia's strong rally earlier this year are now presented with an attractive buying opportunity this month. Morgan Stanley, as a leader in the bullish camp, sees the significant pullback of Nvidia as a good chance to buy at a low point. The analyst stated in a research report on Monday that concerns about the sustainability of demand for Nvidia's AI chips will soon be alleviated by comments from the company's management or its financial performance, indicating that the stock provides an excellent buying opportunity after a 15% drop in September (the largest monthly decline in a year).
The analyst stated in the research report, &#34;Data (demand) is likely to continue to remain strong. It is a good thing for investors to have concerns about recent demand because it is a wrong inference, and Nvidia will soon refute it with facts.&#34;
Nvidia's valuation has become a topic of intense debate among investors. Driven by the AI boom this year, the stock price of the &#34;dominant&#34; player in the AI chip field, Nvidia, has nearly doubled. Although Wall Street analysts are generally optimistic about Nvidia, skeptics like Rob Arnott, the founder of Research Affiliates LLC, believe that Nvidia is overpriced and unlikely to meet expectations. Cathy Wood, the founder of ARK Investment Management and known as &#34;Wood Sister,&#34; also believes that Nvidia is too expensive.
Nvidia's recent decline in stock price is due to pressure on the technology sector caused by rising US bond yields, as well as hawkish signals from the Federal Reserve, indicating a willingness to keep interest rates high for a longer period to combat inflation. However, Nvidia's decline in September was much higher than the 5% decline in the Nasdaq 100 index during the same period.
It is worth noting that there is greater confidence in Nvidia's earnings expectations. Analysts have more than doubled their average earnings per share forecast for Nvidia in the past six months for the fiscal year 2025 ending on January 31, 2025.
The decline in stock price and the increase in profit expectations have brought Nvidia's valuation to its lowest level in nearly a year. Data shows that the forward price-to-earnings ratio (the ratio of stock price to earnings) for Nvidia in the next 12 months is 28 times, only half of what it was in May this year, and lower than the average level of 32 times over the past 10 years.
Grizzle Investment Management's portfolio manager, Thomas George, said, &#34;The current valuation of Nvidia is indeed reasonable given its growth rate. When you look back in a few years, you will find that its current price is very attractive. The strong demand for artificial intelligence chips is not a mirage.&#34;
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Some investors believe that Nvidia's stock price did not rebound after surpassing expectations with over $2 billion in revenue in the second quarter announced in August, indicating that the stock's valuation has already priced in a significant amount of future growth.
However, analysts have become more optimistic after Nvidia's second-quarter performance announcement. Data shows that Wall Street's average target price for Nvidia has risen to $646, implying over 50% upside potential for the stock. Additionally, with Nvidia's recent stock price decline, the gap between expectations for the stock and its current price is approaching its highest level on record.

NVDA

Analysts believe that concerns about the sustainability of demand for NVIDIA's AI chips will soon be alleviated by comments from the company's management or its financial performance. This means that the stock has provided an excellent buying opportunity after falling 15% in September, marking its largest monthly decline in a year.

NVIDIA has fallen nearly 15% since September, and the bulls are calling it a great buying opportunity at current levels.