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Nvidia Stock Drops. Why It Could Still Reclaim Top Spot Over Microsoft and Apple.

$NVIDIA Corp(NVDA)$   was falling early Thursday. The chip maker has lost its position as the most valuable company in the world but Wall Street analysts are pushing back against doubts over its future growth.

Nvidia shares were down 0.9% at $125.25 in premarket trading. The stock closed up 0.3% on Wednesday.

Nvidia shares have fallen from an intraday peak of more than $140 last week amid concerns that its valuation has become stretched despite its core role in powering artificial-intelligence technology. It has fallen back behind Microsoft and Apple in terms of market capitalization.

There hasn't been any new information from the company or sign that its competitors are gaining market share when it comes to AI chips. The worry seems to be simply that Nvidia might have got too big and its growth is priced in. However, analysts are still backing the stock.

"Our analysis shows that becoming the largest company by market cap does not appear to systematically challenge future investment returns. Moreover, feedback from industry contacts (component buyers & sellers) indicate demand for Blackwell [chips] is broadening," wrote Truist Securities analyst William Stein in a research note.

Stein raised his price target on Nvidia stock to $140 from $128.80 previously, keeping a Buy rating.

The new target price is based on a price-to-earnings multiple of 40 times Stein's forecast for Nvidia's earnings in 2025.

The Truist analyst isn't the only one backing Nvidia to go further. A J.P. Morgan survey of its research clients found that 58% thought Nvidia's market capitalization would advance to a range of $3.5 trillion-to-$4 trillion by the end of the year, compared with around $3.1 trillion currently.

Among other chip makers, $Advanced Micro Devices(AMD)$   was down 0.5% and Intel was falling 0.4% in premarket trading. Server maker Super Micro Computer was falling 1.5%.

Nvidia shares have risen 155% so far this year through Thursday's close. That compares with a 15% rise in the $S&P 500(.SPX)$   and a 19% rise in the $NASDAQ(.IXIC)$   over the same period.

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