The astronomical growth of Nvidia (NASDAQ:NVDA) continues to move markets and inspire entire industries. Over the past year, the tech giant’s value has surged by 210%, accompanied by ambitious plans for the future. CEO Jensen Huang recently outlined Nvidia’s strategy to annually introduce new chips and expand their customer base.
It is therefore little surprise that the AI chipmaker has become the darling of Wall Street.
Yet, despite a recent 10-to-1 stock split that made Nvidia shares more accessible, investor Grant Gigliotti remains cautious about taking a position at this time.
“It’s too risky for investors to enter at current levels,” the 5-star investor warns. “I see NVDA as a great fundamental company that is currently winning a popularity contest… People keep investing in NVDA to join the bandwagon and to ride that momentum.”
The investor explains that the company’s shares are trading at 77x P/E ratio, which is well above traditional market levels of 15x. His valuation, based on Nvidia’s 10-year book value growth, suggests a fair price of $82.20 per share, marking a ~40% decrease from current levels.
In addition, the investor predicts that increased pressure from other big players in the market will undoubtedly begin to cut into NVDA’s profits, as other tech firms will seek to diversify their exposure to Nvidia by finding chipsets from alternative sources.
Gigliotti does not question NVDA’s long-term prospects, nor does he deny that the AI leader should be part of long-term portfolios along with other staples such as Apple, Google, and Amazon. His advice: “Wait for an entry point when the stock falls to a more reasonable level and to hold long term and watch it grow with the AI industry.”
For now, Gigliotti rates Nvidia stock a Hold (i.e. Neutral), emphasizing a cautious stance until a better buying opportunity arises. (To watch Gigliotti’s track record, click here)
Gigliotti is therefore placing NVDA on his watch list, and rates NVDA stock a Hold (i.e. Neutral) for the time being. (To watch Gigliotti’s track record, click here)
So, that’s Gigliotti’s view. But what do Wall Street analysts have in mind? The current outlook presents a conundrum. On one hand, with 37 Buys and 3 Holds, NVDA stock boasts a Strong Buy consensus rating. However, after soaring so high this year, analysts anticipate a cooling-off period, with expectations of a ~6% downside over the coming months, as the $126.88 average price target indicates. (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.
