The risk when a stock is “priced for perfection” is that investors’ high expectations leave little room for underperformance or error. Positive outcomes are already priced in and investors assume everything will go smoothly, meaning that even a small amount of vulnerability can lead to a price correction.

Nvidia’s decline could be a sign that investors are beginning to question whether profit expectations for tech stocks have risen so dramatically in recent years on the back of AI euphoria that even strong earnings growth won’t be enough to justify further share price gains, explained Thomas Matthews, Capital Economics’ head of markets, Asia Pacific. But for now, the veteran market observer said he’s not worried.

“We believe the AI ​​rally will continue for some time, despite apparent investor disappointment with Nvidia’s rapid earnings growth,” he wrote in a note to clients on Thursday.

Analysts on Wall Street are also not abandoning their high price targets after the drop in Nvidia shares. Most say the price drop is a buying opportunity.

Analysts at Bank of America Global Research, led by Vivek Arya, reiterated their buy rating and raised their price target on Nvidia shares to $165 from $150 after yesterday’s earnings release. Nvidia offers “unique growth at a very reasonable valuation” and remains the “key beneficiary of the genAI cycle,” they wrote in a note to clients, imploring them to “ignore quarterly noise.”

Despite persistent warnings about Nvidia’s high valuation, Arya and his team noted that the company is trading at around 30 to 35 times calendar year 2025 earnings. With expectations for earnings per share growth of more than 40% going forward, they say that’s actually an “attractive valuation.”

However, Nvidia’s gross margin, a measure of profitability, fell slightly in the second fiscal quarter, to 75.1% from 78.4% in the first fiscal quarter. And the company forecast gross margins to be in the “mid-70% range” for all of 2024, compared with expectations for a fraction higher at 76.4%. Falling gross margins can signal profit pressure or increased competition, but investors typically wait to see whether the decline is a temporary blip or the start of a longer-term trend.

“On the fundamentals side, gross margin was probably the only slightly negative call, but it was relatively well explained and still in line with guidance,” John Belton, a portfolio manager at Gabelli Funds, told Fortune of the problem via email.

Despite the slight margin decline, Nvidia’s profits were strong in the second fiscal quarter. The company brought in more than $30 billion in revenue, beating analysts’ consensus estimate of $28.7 billion. And it was a similar story with net income, which rose 168% year over year to $16.6 billion, compared to the $15 billion expected.

The fiscal third-quarter revenue forecast also topped analysts’ consensus forecast, at $32.5 billion. But it fell slightly short of some more optimistic analysts’ forecasts, and also implied a slowdown in revenue growth to 80% year over year in the coming quarter.

According to Wedbush technical analyst Dan Ives, Nvidia’s earnings report was a “mic drop moment” for CEO Jensen Huang, confirming that the “AI revolution” is here to stay.

Ives said that while some optimistic analyst forecasts for revenue were “slightly higher” than actual numbers, Nvidia’s outlook was still “robust,” demand for its AI-critical chips remains strong and concerns about delays with its new Blackwell chips have been “alleviated.” Nvidia said it expects to see “several billion dollars” of Blackwell revenue in the fiscal fourth quarter.

“Nvidia’s results/outlook/conference calls have only reinforced and validated our optimistic view,” Ives wrote, adding that “Nvidia has changed the technology and the global landscape as its GPUs have become the new oil and gold.”

The tech bulls are out in force

UBS analyst Timothy Arcuri echoed the bullish comments of his Wall Street colleagues in a note to clients Thursday, reiterating his buy rating and $150 price target on Nvidia shares.

Arcuri pointed to the growth in Nvidia’s purchase commitments and supply commitments, arguing that it’s “the most important metric we watch” and “historically predicts future growth.” Nvidia revealed it had $27.8 billion in purchase commitments in the fiscal second quarter, as well as $6.7 billion in inventory. That increased what UBS calls Nvidia’s “total supply” by 40% quarter-over-year, compared to 15% growth in the previous quarter and no growth in the fourth quarter. “We believe this bodes very strong revenue growth over the next few (quarters),” Arcuri wrote of the numbers.

Gabelli Funds’ Belton noted that Nvidia has also addressed the two major bear cases against the company.

First, as previously discussed, the company addressed concerns about delays with its new Blackwell chip by providing guidance for fiscal fourth-quarter earnings. “A clear sign of confidence,” Belton said.

Second, Nvidia could talk about skepticism that its top customers might be spending too much on AI infrastructure, which could mean lower demand going forward. That’s key, considering nearly half of Nvidia’s fiscal second-quarter revenue came from just four customers.

“Importantly, management made a compelling case that large consumer internet customers like META, GOOGL and AMZN are already generating significant returns on AI spend in their core businesses,” Belton said, adding that it’s a similar story for AI model and application builders. “NVDA spoke again to the urgency with which these companies are ‘clamoring’ for as much infrastructure as they can afford in the hopes of winning the race to commercialize breakthroughs in AI technology.”

Nancy Tengler, CEO and CIO of Laffer Tengler Investments, supported the idea that AI spending is just beginning and that the investment has proven worthwhile for most companies. She noted that “old economy companies are embracing AI to improve their margins.”

“This is not the dot-com bubble,” she said. “We think the sell-off is an opportunity to accumulate (NVDA) stock.”

Of course, not every Wall Street analyst is bullish on Nvidia. There are currently no analysts with a sell rating on the company, but there are five with a hold or hold-equivalent rating. Gil Luria of DA Davidson is one of them.

In a note to clients on Thursday, Luria said he fears a drop in demand for Nvidia’s chips is inevitable as his clients begin to focus on the return on their AI spending. “End customers are becoming more conscientious,” he warned.

Luria has a neutral rating on Nvidia and a price target of $90, indicating a potential 25% downside in Nvidia’s stock price over the next 12 months.