Nvidia (NVDA) stock fell more than 5% on Wednesday, erasing gains from early in the session as chip stocks led the way lower during a trading session that saw all three major indexes close in red figures.

The sell-off in Nvidia and other chip names came despite a bullish note from Piper Sandler analysts published Wednesday, which pointed investors to a "tremendous opportunity" to buy some chip names following sector's recent sell-off.

"Fundamentally, NVDA remains the strongest player in the AI accelerator space," wrote Piper Sandler's Harsh Kumar, highlighting the company's next-generation chip. "We also believe that strong tailwinds from the Blackwell architecture coming in October will continue to drive revenues well into 2025 as demand exceeds supply."

"As such," the firm added, "we see tremendous opportunity in NVDA stock with the price off meaningfully from highs of $140." Piper has an Overweight rating and $140 price target on the stock.

During Monday's market meltdown, The Information reported Nvidia's upcoming next-generation AI chips would be delayed by three months, potentially impacting its biggest customers like Microsoft, Alphabet, and Meta.

Subsequently, Nvidia issued a statement stating its next-generation Blackwell chip "production is on track to ramp" in the second half of the year.

Along with Nvidia, Kumar said Advanced Micro Devices (AMD) remains a "Top Pick" for the firm as it gains share in the traditional server market amid struggles with incumbents like Intel. Intel (INTC) stock last Friday fell more than 28% following a poor quarterly report.

Piper Sandler's team also sees an opportunity for AMD should Nvidia's chips turn out to be delayed.

"We believe there is not a lot of truth to the NVDA chip delay, but if it is true, near-term this would bode well for AMD if NVDA is struggling with supply and/or timing of chips," wrote Kumar. AMD stock fell 1% on Wednesday.

Last week, Nvidia jumped more than 12% following peer AMD's quarterly results showing Big Tech continues to spend on data center infrastructure, a promising sign for chip suppliers.

Chip stocks have been volatile over the past few weeks as Big Tech names have led the market downturn.

Since the start of July, the Philly Semiconductor Index is down almost 15%, a move that Piper said prompted it to revisit its coverage and look for "ideas that we believe remain well-positioned fundamentally."

Along with Nvidia and AMD, the firm sees ON Semiconductor (ON) as well positioned in this environment.

Early Wednesday, chip stocks attempted a rebound that was punctuated by the recent market meltdown that sent the Nasdaq Composite (^IXIC) into correction territory.

Nvidia stock fell more than 6% on Monday as the "Magnificent Seven" stocks saw market cap losses of more than $650 billion during Monday's market plunge.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.