According to Morgan Stanley, the recent weakness in Nvidia shares seems inconsistent with the short-term fundamentals, as it was mentioned that investors are still focused on why the stock has lagged in a "very strong AI environment."
Analyst Joseph Moore said the team was "somewhat surprised by Nvidia's underperformance since the beginning of the year after a weak close for 2025," adding that one of the most frequently asked questions by investors is what caused the decline and how those obstacles can be removed in 2026.
He stated that "the indicators remain very strong and are getting stronger," while optimism about profits is already increasing across the market. Moore noted that he is increasingly hearing "signals of profit strength exceeding $9 this year, compared to forecasts of $7.75," making the near-term rise "extremely likely."
It seems that many of the concerns weighing on sentiment are exaggerated, from the analyst's perspective. Moore pointed to the fact that "the number of beneficiaries from artificial intelligence is expanding" with accelerating demand and widespread supply constraints across the industry.
Some investors are also focusing on financing issues related to advanced model developers and "Nvidia's role in this financing," which Moore said will require "some adjustment" in how the market interprets risks.
At the same time, concerns about increased competition from dedicated ASICs and Advanced Micro Devices are still arising, but they are "exaggerated," according to the analyst.
Looking ahead, Moore highlighted the upcoming Vera Rubin platform as a key catalyst that should provide "a strong showcase for Nvidia's leadership" and help alleviate concerns about market share momentum.
"The bottom line is that we see the stock outperforming from here," he wrote, noting that while Nvidia still faces "a wall of concern to climb," the company appears well-positioned to overcome it.#UBS #stokes $USDT
