Morgan Stanley has reaffirmed its Overweight rating on Nvidia Corporation (NASDAQ:NVDA), keeping the company as its top choice, despite broader concerns about the semiconductor sector.

What Happened: Morgan Stanley has reiterated its “Overweight” rating on Nvidia, labeling it a “unique opportunity” within the semiconductor space, reported Investing.com. The company remains Morgan Stanley’s top pick, with analysts expressing confidence in Nvidia’s potential for business acceleration, despite widespread fears of a slowdown in sector conditions.

The analysts highlighted Nvidia’s recent strong performance across various metrics, including gross margins, revenues ex-China, and a recovering networking sector. They pointed out that the company’s cautious forward guidance for the second half of 2024 and calendar year 2026 was shaped by geopolitical uncertainties related to China.

"Our view continues to be that we are materially undershipping demand," stated the analysts. 

Analysts expect the current rack bottlenecks causing inventory buildup at original design manufacturers (ODMs) to be resolved soon. As these issues become clear and demand rises, they foresee a shift toward a tight supply of Bianca cards.

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Why It Matters: Nvidia’s strong performance and potential for growth have been recognized by other financial institutions as well. Bank of America recently increased its price target for Nvidia to $180, indicating a further 30% rally from current levels. This followed a staggering 1,100% return since October 2022, suggesting that Nvidia may still have significant upside potential.

However, geopolitical tensions, particularly the Chinese export ban, have impacted Nvidia’s results. Despite this, Nvidia’s CEO Jensen Huang has stated that demand remains ‘incredibly strong‘ during the Q1 earnings call. These factors, coupled with Morgan Stanley’s reaffirmation, underscore Nvidia’s resilience and potential in the face of industry-wide challenges.

Benzinga Edge Stock Rankings shows that NVDA had a strong price trend over the short, medium and long term. Its momentum ranking was high at the 76th percentile, whereas its value ranking was poor at the 7th percentile; the details of other metrics are available here.

Over the past year, the stock soared 19.46%.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.