Concerns that the artificial intelligence (AI) boom is fading might be premature, according to Bernstein analysts. Despite a 15% year-to-date decline in Nvidia (NASDAQ: NVDA) shares and a sharp 8% drop on Monday, Bernstein maintains a bullish stance on the AI chip leader.

Nvidia Stock at a Discount: A Rare Opportunity?

• Nvidia is now trading at 25x next twelve months (NTM) earnings, marking its weakest valuation in a year and near a 10-year low.
• The stock has also dipped below parity relative to the Philadelphia Semiconductor Index (SOX)—a scenario seen only once or twice in the past decade.
• The current valuation premium over the S&P 500 is the lowest since 2016.

Bernstein sees this as a rare buying opportunity, emphasizing that historically, buying NVDA at 25x earnings or lower has resulted in significant returns with limited downside risk.

AI Demand Still Strong: Blackwell Product Cycle & Capital Expenditures

Easing Supply Constraints

• Nvidia's Blackwell AI chip revenues hit $11 billion in January, showing that supply constraints are easing.
• The firm expects demand to exceed supply in the coming quarters.

Growing AI Investments

• Nvidia's customers are increasing capital expenditures, signaling sustained AI infrastructure demand.
• Fears that AI demand is fading—especially with competition from firms like DeepSeek—are overblown, according to Bernstein.

Regulatory Risks: China Exposure is Manageable

Concerns over AI diffusion rules and potential further bans in China have weighed on sentiment. However:

• Nvidia's China sales, despite reaching record levels, now account for the lowest percentage of revenue in the past decade.
• Even in the event of an H20 chip ban, Bernstein expects a limited EPS impact (~$0.25 per $10 billion lost revenue).
• A full China data center ban could hit EPS by mid to high single digits, but the stock has already pulled back by a much greater margin.

Catalysts Ahead: AI Trade Not Over Yet

Bernstein sees multiple catalysts for Nvidia in 2024, including:

✅ Rising AI-related spending across cloud and enterprise sectors.
✅ The start of a new product cycle, which typically drives demand.
✅ The upcoming GTC event, where Nvidia could unveil further innovations.

With these tailwinds, Bernstein reiterates its Outperform rating on NVDA with a $185 price target, implying significant upside potential.

Final Thoughts: A Dip Worth Buying?

While Nvidia has faced a rough start in 2024, Bernstein sees the current pullback as an opportunity rather than a warning sign. The AI boom is far from over, and as Nvidia's valuation becomes increasingly attractive, long-term investors may find this a compelling entry point.

Stay Updated with Real-Time Market Data

For up-to-date insights on Nvidia's financials and valuation metrics, check out:

• Full Financial as Reported API - Get detailed balance sheets, income statements, and cash flow data.
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As Nvidia's new product cycle gains momentum, this may be a key moment to watch AI stocks closely.