Nvidia's sharp stock selloff sparks this analyst's call to buy the dip

By Emily Bary

Melius Research says Nvidia has good demand visibility through October and compelling potential from the Blackwell launch later this year

Following the worst daily drop for Nvidia Corp. shares in over four years, one analyst advises that investors buy the dip.

Melius Research's Ben Reitzes doesn't think that investors should be worried about Nvidia's (NVDA) demand picture, even though the lack of an upbeat preannouncement from partner Super Micro Computer Inc. (SMCI) last week spooked Wall Street.

Read: Why Super Micro's stock tumbled to its worst day since August

Super Micro preannounced positive results three months back when it set its earnings date, and the fact that the company didn't this time around "has investors concerned that Nvidia H100 demand is more in balance due to increased supply and/or some customers waiting on Blackwell-based systems," Reitzes wrote, referring to the company's new Blackwell lineup.

But Reitzes thinks that Nvidia "has visibility on orders through October with hyperscalers" and Tier 2 cloud providers, he wrote in a Monday note to clients. And while Wall Street may be nervous now about Nvidia's upside potential, Reitzes ntoed that the forthcoming Blackwell launch could spur double-digit growth at the end of this calendar year and throughout 2025.

Nvidia shares were up 1.2% in premarket trading Monday after falling 10.0% in Friday's action. That was the stock's steepest single-day percentage decline since it plunged 18.5% on March 16, 2020, according to Dow Jones Market Data.

Read: Nvidia's stock plunge leads 'Magnificent Seven' to a record weekly market-cap loss

Reitzes also defended shares of Dell Technologies Inc. (DELL), which saw a lesser, 3% decline in Friday action. Dell, like Super Micro, is in the server business, and both stocks have seen explosive runs in recent months on the heels of artificial-intelligence demand.

He noted that Super Micro is expected to post a 9% sequential bump in revenue for the March quarter, while Dell is forecast to see a 5% sequential decline in revenue from its server segment.

"However, our checks indicate Dell is gaining AI server share and recently won some large AI orders," he wrote. "A much better setup."

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-Emily Bary

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04-22-24 0840ET

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