Morgan Stanley Wealth Management buys the dip in Nvidia

Nvidia is poised for even bigger gains from current prices, according to Morgan Stanley Wealth Management. In a note published on Thursday, the asset manager wrote that it had increased its position in the dominant maker of graphics processing units, or GPUs, used in artificial intelligence. Morgan Stanley Wealth Management currently has an overweight rating on Nvidia. Nvidia bucked the broader market sell-off to rise 3.7% on Thursday, extending its advance this week to 8.4%. The rebound follows a loss of 14% last week. Despite an 8% pullback in the month of April, Nvidia has still managed to soar almost 67% this year after more than tripling in 2023. Morgan Stanley Wealth Management's $1,000 price target implies that the stock could rise another 21%. Nvidia shares sell for a “valuation in line with historical trough multiples,” and its growth potential justifies a higher valuation, Morgan Stanley said. The bank sees Nvidia as a leader in AI GPUs, noting its economies of scale and pricing power. “This multiple reflects a premium to other semiconductor peers, due to expansion in all AI names as well as the team's higher conviction in estimates given NVDA's higher AI exposure,” the firm wrote. Additionally, a growing AI tailwind could provide even more ammunition for Nvidia stock to balloon. “NVDA recently announced a new AI chip, and if demand outstrips supply, similar to what has happened over the past year for NVDA's current AI chip, consensus expectations for gross margins may be too low for FY25 and FY26,” the wealth manager wrote. “NVDA should trade at a premium given its higher probability of upward [earnings] revisions in the near term.” — CNBC's Michael Bloom contributed to this report.