Buy the dip on Nvidia? Wall Street says the real AI mania hasn’t even started

Nvidia (NVDA), widely viewed as the linchpin of the AI trade, may have received a meaningful vote of confidence after Morgan Stanley pushed back against concerns of an “AI bubble,”

In a recent note to clients, Morgan Stanley said that any pullbacks in the AI-driven market narrative should be seen as buying opportunities ahead of another leg higher.

“Any weakness in the short-term is an opportunity to add long exposure into 2026,” the bank’s analysts wrote.

Morgan Stanley is now forecasting a roughly 1,000-point rally in the S&P 500 over the next 12 months, assigning the benchmark a new target of 7,800.

For Nvidia, the call comes at a pivotal moment. Even after reporting earnings that exceeded Wall Street expectations, the stock has slid about 15% from its all-time high amid a broader market pullback.

While some consolidation was expected following the market’s rapid advance since the “Liberation Day” flash crash, the selloff also reflected mounting concerns about concentration and stretched valuations in Big Tech, particularly in AI-exposed names.

Is AI really overvalued, or just getting started?

AI’s meteoric rise has triggered warnings from several market indicators, including the Buffett Indicator and the Shiller Cyclically Adjusted Price-to-Earnings (CAPE) ratio, both of which suggest that stocks may be running ahead of fundamentals.

While valuations may appear stretched in the near term, enthusiasm around AI remains underpinned by massive infrastructure spending from Big Tech and early evidence of productivity gains among companies that have adopted the technology.

Magnus Grimeland, founder of Antler and a prominent venture capital investor, pushed back on the idea that the market is in bubble territory.

“I definitely don’t think we’re in a bubble,” he told CNBC, citing the speed of AI adoption as a primary catalyst. “There’s a willingness to invest into using that technology […] and that’s happened immediately,” Grimeland said.

And once again, all roads lead back to Nvidia. The chipmaker delivered another blowout quarter and projected $65 billion in revenue for the current period.

Even more striking, Nvidia’s order book for AI chips in 2025 and 2026 has reached $500 billion, underscoring the scale of demand from hyperscalers and enterprise customers.

For Nvidia, the idea of an AI bubble doesn’t square with what the company is seeing on the ground.

“We see something very different,” CEO Jensen Huang said. “We see the opportunity to grow for quite some time.”