Nvidia looks to be losing its position as the favored play on the artificial-intelligence boom. But RBC Capital Markets analyst Srini Pajjuri thinks that makes this the perfect time to pile into the chip maker's stock.

Nvidia shares were up 0.8% at $188.55 in premarket trading, after rising 2.1% during the day's trading session.

While Nvidia got a bump from Taiwan Semiconductor Manufacturing's blowout earnings, it isn't at the forefront of investors' minds as far as AI plays go in recent months, with investor interest seemingly focused on the memory-product segment instead.

Nvidia stock has largely moved sideways for the past three months amid concerns about market-share loss to Google's Tensor Processing Units as well as coming chips from Advanced Micro Devices.

RBC's Pajjuri is betting Nvidia will rediscover its momentum, initiating coverage of the stock with an Outperform rating and $240 target price in a research note.

"We expect capex to remain elevated for the next 12-18 months driven by intense competition among Big 4 hyperscalers who are well-capitalized," Pajjuri wrote. "While circular financing deals in the industry have raised some concerns, hyperscale companies have the balance sheet strength and appear highly motivated to invest in compute infrastructure."

Nvidia has a roughly 80% share in AI accelerators, which is set to fall to 70% by 2027, according to the RBC analyst. But he doesn't see that as a problem.

"We expect ASICs/AMD to gain some ground as customers seek diversification. Google Gemini's resurgence could also pose an indirect threat to Nvidia, although the LLM battle is far from settled," wrote Pajjuri. "However, we see limited risk given Nvidia's performance lead, rackscale expertise, and full-stack offerings. Rubin systems are in production and should help sustain the lead while Groq offers roadmap optionality."