Nvidia (NVDA) Stock Drops 4.4% Before Wednesday’s Earnings Report: Should You Buy?

Key Takeaways

• Nvidia shares dropped 4.42% to $225.32 on May 15, triggering a broader semiconductor sector decline
• UBS cautioned that 8 of 12 major semiconductor firms represent “extremely crowded long” trades
• TD Cowen boosted NVDA’s price target from $235 to $275, pointing to a $1 trillion+ Blackwell and Rubin order backlog
• Bank of America increased its price target to $320 while Wells Fargo lifted its forecast to $315, maintaining positive outlooks
• Nvidia’s Q1 FY2027 results arrive Wednesday, May 20 — market participants seek confirmation of sustained Blackwell momentum

With Wednesday’s quarterly report looming, Nvidia finds itself navigating increased selling pressure, with shares retreating 4.42% to $225.32 as of May 15. However, the pullback hasn’t dampened Wall Street’s enthusiasm.

NVIDIA Corporation, NVDA

The decline wasn’t isolated to Nvidia alone. A widespread semiconductor sector retreat saw Micron plunge 6.62%, Intel slide 6.18%, AMD decrease 5.69%, Broadcom fall 3.32%, and Marvell decline 3.12%.

Nevertheless, these equities have experienced remarkable rallies. From March 30 forward, Intel rocketed 164% higher, Micron climbed 125%, AMD advanced 116%, Marvell gained 101%, and Nvidia itself appreciated 36%. Such momentum virtually guaranteed eventual profit-taking.

UBS highlighted positioning concerns in a recent research note. Their examination revealed 8 of the 12 largest global semiconductor firms by market capitalization represent extremely crowded long positions. The firm also cautioned that as cloud hyperscalers transition from asset-light to asset-heavy infrastructure models, cash flow return on investment may deteriorate throughout the next three years.

They specifically referenced Nvidia’s CFROI, projected to reach 82% this year. The risk: historically, merely 0.09% of worldwide equities have maintained returns exceeding 50% for five consecutive years, and only 0.02% for ten years.

Wall Street Maintains Optimistic Stance Heading Into Results

Despite UBS’s reservations, most prominent analysts continue supporting Nvidia.

TD Cowen’s Joshua Buchalter — positioned 69th among 12,243 Wall Street analysts with a 72% accuracy rate — elevated his price objective to $275 from $235. He highlighted that Nvidia’s leadership team estimates its combined Blackwell and Rubin order pipeline surpassing $1 trillion, representing potential upside beyond current consensus forecasts. He anticipates Nvidia will exceed quarterly revenue guidance by $1 billion to $2 billion.

Bank of America’s Vivek Arya, ranked 80th with a 65% accuracy rate, increased his target to $320 from $300, maintaining Nvidia as his preferred sector selection. His projection employs a 28x price-to-earnings multiple applied to his 2027 forecast, falling within Nvidia’s historical forward P/E corridor of 25 to 56. BofA also projects the AI data-center marketplace potentially expanding to $1.7 trillion by 2030.

Wells Fargo elevated its target to $315 from $265.

The Post-Earnings Decline Pattern

Here’s the peculiar situation Nvidia confronts: shares frequently decline even following impressive earnings performances.

Deutsche Bank’s Ross Seymore recently cautioned that Nvidia’s anticipated growth throughout the coming two years seemingly already factors into current valuations, complicating the delivery of meaningful positive surprises.

Nvidia’s most recent quarterly disclosure demonstrated record revenue reaching $68.1 billion accompanied by a non-GAAP gross margin of 75.2%.

BofA’s identified downside scenarios include gaming sector weakness, custom silicon competition, China export limitations, irregular enterprise purchasing patterns, and heightened regulatory oversight.

All attention turns to Wednesday.

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