NVIDIA (NASDAQ:NVDA) has seemed like an unstoppable force ever since the power of AI burst onto the global consciousness with the release of ChatGPT towards the end of 2022.
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Propelled by a wave of megatech companies eager to push innovation across various sectors, NVIDIA’s growth has surged dramatically. This is evident in its stock, which has skyrocketed by 171% over the past year.
Yet, one investor, known as Bluesea Research, sees this surge as a warning sign, predicting that the AI leader may face turbulent times in the near future.
“Despite the higher market share of Nvidia, Wall Street could become increasingly cautious about the ability of the company to retain its juicy margins,” Bluesea opined.
The investor points to a number of reasons for pessimism, including the highly concentrated set of customers that make up almost 50% of Nvidia’s revenues.
“We have not seen a big revenue or margin improvement from cloud providers in the last few earnings, which can force them to rein in their AI spending,” the investor opined. Bluesea adds that any scaling back of capex spending from these megascalers would pose a big problem for Nvidia.
Another looming issue is the strengthening of Nvidia’s competition from AMD, which Bluesea notes is expected to deliver $5 billion worth of AI chips in 2024. “If AMD’s current growth trajectory continues in 2025, we could see a major headwind for Nvidia’s margin,” writes the investor.
All told, Bluesea underscores the stark contrast between bullish and bearish projections for FY 2026, with the highest estimate being more than four times the lowest.
The investor is not convinced that the rosy numbers will come to fruition, making the potential rewards simply not worth the risk. “The upside is limited while the company faces massive headwinds, which makes the stock a Sell at the current price,” the investor summed up. (To watch Bluesea Research’s track record, click here)
That said, Bluesea’s cautious stance stands in contrast to the broader market sentiment. Wall Street remains highly optimistic about NVDA’s future, with 39 Buy ratings and just 3 Holds, giving it a Strong Buy consensus rating. The stock’s 12-month average price target of $152.44 suggests an upside of 25.5% for the next 12 months. (See NVDA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
