Recently, the global 'AI chip leader' $NVIDIA (NVDA.US)$ stocks have been heavily sold off, but Goldman Sachs has not been deterred by this trend.

Last Tuesday, Nvidia's stock price plummeted by 9.53%, with a market cap evaporating by about $279 billion in a single day, setting a new record for the U.S. stock market. Nvidia's market cap has cumulatively evaporated by about $400 billion last week.

Data from Bespoke Investment Group shows that Nvidia has been one of the biggest drivers of the worst September start for the S&P 500 index since 1953, but the index recovered some lost ground on Monday.

Despite the sell-off of Nvidia stocks, Goldman Sachs chief analyst Toshiya Hari still maintains a buy rating on this chip giant.

On Monday, at the 2024 Goldman Sachs Communication and Technology Conference, when asked if the Goldman Sachs team believed Nvidia stocks were oversold, Hari replied, "Yes, we think so."

"Recently, Nvidia's performance has not been great, but we are still optimistic about the stock," Hari said. "First, the demand for accelerated computing remains very strong. We tend to spend a lot of time on super-large-scale enterprises (Amazon, Google, Microsoft, etc.), but you will see the demand expanding to a broader range of enterprises, even sovereign states."

The Nvidia selloff stemmed from the quarterly report for the second quarter of the 2025 fiscal year released on August 28th. Despite the performance exceeding expectations, it was not good enough for Wall Street. Although Nvidia's revenue was 4.1% higher than Wall Street's expectations, the company's profit margin hit its lowest since the fourth quarter of the 2023 fiscal year.

One major debate surrounding NVIDIA in the market is whether its profitability momentum is sustainable.

Goldman Sachs' stock research team pointed out in a recent report that investors' sentiment towards artificial intelligence has undergone a nearly 180-degree change since early 2023. Investors' patience is wearing thin and they want to see - rather than be told - improvements in AI-driven revenue streams and profit margins.

However, Goldman Sachs also emphasizes that for profound technological changes like artificial intelligence, judgments should not be based solely on short-term costs and returns. The bank predicts that by the second half of 2025, generative AI will make substantial contributions to industry growth.

"I believe their competitive position remains very solid," Hari said when speaking about NVIDIA. "We do think that in the commercial chip field, NVIDIA is the top choice, and even compared to custom chips, they have advantages in terms of innovation speed."

In addition to underperforming Wall Street's highest expectations, the highly anticipated Blackwell chip has delivery issues, recent rumors of antitrust investigations, investor caution towards AI investments, and increased overall market volatility are all catalysts for the sharp drop in NVIDIA's stock price.

Bank of America recently stated that the significant drop in NVIDIA's stock price over the past week has provided an attractive buying opportunity.

After a steep decline of 14% last week, NVIDIA's stock price rebounded significantly by 3.5% on Monday, boosting the performance of the tech-heavy Nasdaq. So far this year, NVIDIA's stock price has accumulated a staggering 121% increase.

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