The excitement around AI has pushed Nvidia (NASDAQ:NVDA) stock to exhilarating heights. To wit, shares of the chipmaker are now up almost 200% over the past 12 months.
The semi giant even briefly overtook Microsoft as the most valuable publicly traded company in the world, and currently boasts a market cap north of $3 trillion. The company also has ambitious plans to unveil new chips at an annual clip going forward, but is that enough to keep the bullish thesis intact?
Not according to one Street stock expert. While still believing Nvidia is a great company, New Street Research analyst Pierre Ferragu thinks it is time to reassess its prospects. “Although Nvidia remain the strongest franchise for AI datacenters, near term expectations and valuation justify a more prudent view on the stock,” writes the 5-star analyst.
Ferragu does not foresee the capacity for further share price gains for now, citing the consensus view that revenue growth will slow to the mid-teens while hyperscalers decrease their rate of investment in AI. Further depressing expectations, Ferragu points out that Nvidia’s competitors will likely start to capture a higher share of the riches.
“We do not see any further upside in the stock, and, if anything, a risk of derating,” writes Ferragu, who has now downgraded his rating from Buy to Neutral while his $135 price target represents growth of around 7% from current levels. That being said, Ferragu remains confident in the quality of the company and would be “buyers again, but only on prolonged weakness.” (To watch Pierre Ferragu’s track record, click here)
Compared to most of Wall Street, Ferragu seems to be quite the contrarian. With 41 ratings set over the past three months, the heavily covered stock boasts 37 Buys against 4 Holds, making the consensus view a Strong Buy. However, the 12-month average price target of $136.49 represents an increase of around 8.5%, signaling that even those who are bullish on Nvidia do not envision that the white-hot growth seen recently will continue. (See Nvidia’s stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
