Why Nvidia stock is down over 2% on Tuesday

Nvidia shares NVDA fell around 3% in early Tuesday trading as higher Treasury yields pressured semiconductor stocks and weighed on the broader market.

The decline came alongside a wider pullback across chip stocks.

Western Digital fell almost 7%, while Sandisk dropped more than 6%. Marvell Technology and Seagate Technology also fell more than 6%.

The S&P 500 declined 0.5%, while the Nasdaq Composite fell 1.1%. The Dow Jones Industrial Average was down 191 points, or 0.4%.

The 30-year Treasury yield climbed more than 1 basis point to 5.323%, after reaching its highest level since June 2007 on Monday.

Yields have risen as investors remain concerned about persistent inflation and elevated oil prices.

US crude rose on Monday and gained another 0.9% Tuesday to trade above $85 a barrel as negotiations between the US and Iran stalled.

Nvidia rally faces broader market pressure

Nvidia's Tuesday decline comes after a strong rebound in recent weeks.

Shares closed around $225 on Monday for a second consecutive session, a level not seen since mid-May.

The stock's recent advance has pushed its year-to-date gain above 16%, compared with gains of about 15% for the Nasdaq Composite and 13% for the S&P 500.

From the recent market bottom on July 29, Nvidia shares have gained about 15%, compared with a 1.5% advance for the iShares Semiconductor ETF and an almost 2% gain for the VanEck Semiconductor ETF.

Nvidia had trailed those semiconductor baskets for much of the year as investors shifted toward memory and CPU stocks and renewed questions emerged over the sustainability of the company's growth.

The recent rebound has coincided with a broader recovery in the AI infrastructure trade.

Nvidia's increased financial support for key customers is also looking less risky than initially feared, while a new financing initiative could make funding the broader AI buildout more attainable.

New details on revenue growth at OpenAI and Anthropic, both major Nvidia chip customers, have also supported expectations that the companies can continue spending on compute.

Nvidia is scheduled to report its fiscal 2027 second-quarter results on August 26.

BofA maintains bullish view on Nvidia stock

BofA Securities reiterated its Buy rating and $350 price target on Nvidia following the company's $105 billion in commitments related to OpenAI.

BofA said after discussions with Nvidia senior management that the chipmaker remains committed to securing chip supply, land, power and infrastructure for frontier AI labs and so-called neo-clouds.

According to BofA, the strategy is intended to diversify Nvidia's customer base beyond public hyperscalers that are increasingly developing their own custom chips.

BofA cited solid GPU rental rates, compute scarcity and Nvidia's free cash flow generation as factors supporting the company's commitments.

The firm also highlighted risks if AI demand slows, which could pressure Nvidia's growth rate and balance sheet.

BofA expects Nvidia to provide more disclosure around its off-balance-sheet commitments when it reports earnings on August 26.

BofA said Nvidia trades at 18 times and 15 times calendar 2027 and 2028 enterprise value to free cash flow, respectively, compared with its blended valuation multiples of 36 times and 22.5 times.

The firm views that valuation gap as a compelling opportunity while maintaining its $350 price target.