Nvidia stock is in something of a rut. The lack of upward movement looks to be driven by investor preference for smaller names exposed to the artificial-intelligence boom and a rotation away from technology stocks.
Nvidia shares were up 0.99% in premarket trading Thursday, after climbing 3% on Wednesday's trading session. However, the stock is hovering near the same levels it was at last August.
When it comes to AI, investors have flocked to the memory-product segment with names such as Micron Technology, and makers of semiconductor-manufacturing tools such as Applied Materials in recent months. In the broader chip sector, Intel has been the standout gainer as investors bet on its recovery.
"The market capitalization for the front line AI stocks like Nvidia...have risen so much and they have become such a large portion of key benchmarks that it makes it hard for many investors to own significantly more of these stocks," wrote UBS analyst Timothy Arcuri in a research note this week.
It's not just Nvidia that has been affected. The price ratio between the Roundhill Magnificent Seven ETF, which offers investors exposure to Nvidia and other megacap technology companies on an equal-weighted basis, and the cohort on an equal-weighted basis, and the SPDR S&P 500 Trust, which tracks the benchmark index, touched its lowest level since Sept. 2 on Wednesday.
However, Wall Street still generally sees Nvidia's sideways movement as a buying opportunity ahead of its next rally.
KeyBanc analyst John Vinh reiterated a $275 price target and an Overweight rating on Nvidia stock this week. He noted the company is trading at a price-to-earnings multiple of 24 times the consensus forecast for its fiscal 2027 profit, a discount to its three-year median multiple of around 30 times.
"We believe Nvidia will remain the largest beneficiary of continued elevated cloud capex, which is expected to maintain momentum through 2026, driving demand for next-gen GPUs and rack-scale systems across hyperscalers," wrote Vinh.
