Morgan Stanley is using pullback in Nvidia stock to increase its position

Morgan Stanley investment strategists announced changes to the firm’s Global Equity portfolio.

Just a few weeks after the banking titan added a position in Nvidia (NASDAQ:) for the U.S. Model portfolio, it now added a position in the chipmaker for its Global Equity Model.

The bank bought more Nvidia shares, citing the chipmaker’s “exposure to AI, pricing power and growth opportunities that are still underappreciated, and to reduce the Model’s underweight to NVDA given the recent pullback in the equity market.”

Nvidia stock is down over 15% since the start of September on China headwinds.

“The commercialization of generative AI (Chat GPT) set off an arms race in compute capabilities required to run inference and training of AI datasets. This has driven a material shift in demand for NVDA’s chips which has led to a huge revisions cycle,” the analysts said.

“Although the stock has rallied in response to this shift in demand, we note that valuation has de-rated over this period which is reflective of positive earnings surprises. With the stock trading at 26x consensus F24E EPS, ~50% below its May peak of 50x, we believe current levels offer an attractive entry point to build a position in a leader in AI.”

Nvidia is covered by analysts at Morgan Stanley, who have the stock as their Top Pick in the Semiconductor sector.