Nvidia (NASDAQ: NVDA) gave back some gains on Thursday, slipping about 0.7% to around $217 in afternoon trading, as investors locked in profits following a five-session advance that had lifted the chipmaker's shares by roughly 12%. The pullback came despite continued optimism about artificial intelligence demand and ahead of the company's quarterly earnings report later this month.
The broader market was mixed, with the S&P 500 hovering near the flatline and the Nasdaq Composite edging up 0.2%, while the Dow Jones Industrial Average fell 171 points, or 0.3%. Investors also monitored developments in the Middle East and assessed another round of corporate earnings.
No company-specific catalyst immediately explained the decline, suggesting the move was largely profit-taking after the recent run-up. The stock had rallied as confidence in Nvidia's dominant position in the AI semiconductor market regained momentum.
SpaceX endorsement bolsters AI leadership
A key driver of the recent rally was Elon Musk's announcement that SpaceX would standardize its AI infrastructure on Nvidia's processors. During SpaceX's latest earnings call, Musk said the company would build exclusively on Nvidia's Vera Rubin architecture, reinforcing the view that Nvidia remains the preferred supplier for large-scale AI projects. This helped ease concerns that competition from rivals and custom chip developers would quickly erode Nvidia's market share.
The endorsement follows a period of volatility for AI chip stocks, with soft guidance from SanDisk earlier this week weighing on the sector. However, Nvidia's recent gains have outpaced many peers, and the stock's valuation has become more attractive after a pullback earlier this year.
Valuation and analyst outlook
Morningstar said Nvidia now fits the profile of a growth-at-a-reasonable-price investment and maintained its $280 fair value estimate. The research firm noted that shares trade at roughly a 30% discount to that estimate, and it described Nvidia as the leading supplier of GPUs, software, and networking technologies used in AI. While Morningstar expects major cloud providers to continue developing proprietary AI chips and competitors like AMD to expand their offerings, it believes those efforts will only erode a limited portion of Nvidia's competitive position.
Wall Street's average price target on Nvidia stands at $314.29, according to FactSet. Bernstein recently reiterated its Buy rating and a $315 price target, arguing that continued expansion in AI infrastructure spending and new sources of demand support further upside. The stock's recent rally has also been helped by renewed AI optimism, which has lifted the broader semiconductor complex.
Earnings test ahead
Investor attention is now turning to Nvidia's earnings report, scheduled for Aug. 26. The results will provide a key test of whether the company can sustain its rapid growth as spending on AI infrastructure continues across the technology sector. With the stock's recent momentum, traders will be watching for evidence that demand for Nvidia's AI hardware remains strong enough to justify its premium valuation.
Some analysts have pointed to strong AI-driven earnings from other companies as a positive sign for Nvidia's upcoming report. However, the stock's recent pullback and the broader market's mixed performance suggest that investors are also weighing risks, including potential supply chain constraints and competition from custom silicon.
As the earnings date approaches, Nvidia's ability to beat expectations and provide robust guidance will likely determine whether the stock can extend its gains or face further consolidation. For now, the chipmaker remains a central player in the AI trade, and its quarterly results are expected to be a major market catalyst.
This article is for informational purposes only and does not constitute financial advice.
