Nvidia (NASDAQ:NVDA) has undeniably left its competitors behind, establishing itself as one of the world’s most valuable companies. The AI chipmaker continues to surpass consensus expectations, while driving revolutionary technology that only seems to be growing in importance.
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Yet, as every investor is reminded, past performance is no guarantee of future returns. Though bearish opinions of Nvidia are hard to come by, they exist for those wishing to find fault with the undisputed industry leader.
One top investor, known by the pseudonym Value Portfolio, is now making the case that the time has come to part ways with Nvidia.
“Nvidia Corporation faces declining demand, increasing competition, and lower margins, making it a poor investment,” writes the 5-star investor, who sits in the top 1% of TipRanks’ stock pros.
Value Portfolio zeroes in on the reasons for this contrarian take, including decreasing capex investments from hyperscalers, growing competition from other megatech companies, and potential turbulence in the Chinese market.
To illustrate the rising competition, Value Portfolio points to a “who’s who” of industry heavyweights — AMD, Google, Broadcom, Microsoft, and Amazon — all of which are ramping up their chip production, potentially eating into Nvidia’s market share.
“The ramp-up of GPU competition is clear, and it presents a present risk to Nvidia. More importantly than a risk to Nvidia’s GPU business, it represents a risk to Nvidia’s margins,” Value Portfolio argues.
On the demand side, concerns are mounting. Hyperscalers, including Meta, are reportedly rethinking their multi-billion-dollar AI investments, questioning whether such hefty outlays are justified.
Adding more fuel to the fire, Nvidia is now the subject of a fresh antitrust probe in China, its second-largest market after the U.S. Value Portfolio warns that any decline in Chinese sales could have a meaningful impact on the company’s financials.
Despite these challenges, the investor acknowledges Nvidia’s status as a momentum stock, with its share price far outpacing its earnings-per-share growth this year. Still, Value Portfolio concludes that Nvidia’s valuation remains “well above any rational level,” cautioning that while the stock may rise further in the short term, its long-term risks should not be ignored.
With this in mind, the investor is taking a stand — rating Nvidia shares a Sell. (To watch Value Portfolio’s track record, click here)
Unsurprisingly, few share this skeptical view. Nvidia maintains a Strong Buy consensus rating, backed by 37 Buy recommendations and just 3 Holds from Wall Street analysts. The stock’s 12-month average price target of $176.14 points to potential gains of ~31%. (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.
