Nvidia (NVDA) shares fell over 5% on Wednesday, wiping out earlier gains as chip stocks led a market downturn that saw all three major indexes close in the red.

Despite the sell-off, analysts at Piper Sandler issued a bullish note, highlighting a "tremendous opportunity" to buy chip stocks following the sector's recent decline. Harsh Kumar, an analyst at Piper Sandler, emphasized Nvidia's strong position in the AI accelerator market and the upcoming Blackwell architecture, which is expected to drive revenue growth into 2025.

Piper Sandler maintains an Overweight rating on Nvidia with a $140 price target, noting the stock's significant drop from its highs. The firm sees strong potential for Nvidia, especially with the Blackwell chip production on track for the second half of the year.

In addition to Nvidia, Piper Sandler's Kumar identified Advanced Micro Devices (AMD) as a top pick, citing its gains in the traditional server market. AMD's stock fell 1% on Wednesday, but the firm sees potential benefits if Nvidia faces any delays with its chips.

Last week, Nvidia's stock surged over 12% following AMD's positive quarterly results, which indicated continued investment in data center infrastructure by Big Tech companies. However, chip stocks have been volatile, with the Philly Semiconductor Index down nearly 15% since early July.

Piper Sandler also highlighted ON Semiconductor (ON) as well-positioned in the current market environment. Early Wednesday, chip stocks attempted a rebound, but the recent market meltdown pushed the Nasdaq Composite into correction territory.

Nvidia's stock dropped more than 6% on Monday, contributing to significant market cap losses among the "Magnificent Seven" stocks.