Nvidia (NASDAQ:NVDA) stock closed 2024 on a high note, surging 171% and surpassing the $3 trillion market cap milestone.
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The company’s remarkable growth has been driven by the soaring demand for its AI chips. In the third quarter of fiscal 2025, Nvidia reported a 94% year-over-year increase in revenue, reaching $35.08 billion. Moreover, operating margins of 62% underscored its ability to not only expand its top line but also convert this demand into substantial profitability.
Nevertheless, despite Nvidia’s commanding market position, top investor Cavenagh Research has expressed concerns that the new year will not be quite as rosy as the last one.
“Against a blowout 2024, I believe that Nvidia faces a backdrop in 2025 that could challenge the company’s recent growth trajectory,” notes the 5-star investor, who sits in the top 4% of TipRanks’ stock pros.
Cavenagh highlights several factors that could lead to turbulence for NVDA in the coming year. Chief among them are the efforts of potential competitors like Broadcom, Marvell Technology, and AMD, who are eager to claim a larger share of the AI data center market.
“Nvidia’s competitive moat is only sustainable if the company manages to re-innovate and improve its product every 12-24 months,” asserts Cavenagh.
Zooming out, the investor notes that much of Nvidia’s robust growth relies on massive capital expenditures by hyperscalers such as Meta and Microsoft. Cavenagh is skeptical that the past will be prologue when it comes to increased spending, as doing so would severely limit free cash flow for these publicly traded companies.
“I doubt that investors will allow a substantial acceleration of the CAPEX spent,” writes Cavenagh, adding that “revenue growth for Nvidia may decelerate sharply in 2025.”
Another area of concern for Cavenagh is the potential for production hiccups in the coming year. The investor cites previous issues with Blackwell GPUs, and the scale of demand, complexity of the products, and the aggressive timelines could very well cause supply shortages going forward.
“I think Nvidia’s 2025 won’t be so easy,” Cavenagh concludes, assigning a Sell rating to NVDA shares. (To watch Cavenagh Research’s track record, click here)
Wall Street analysts, on the other hand, see nothing but clear skies up ahead. With 37 Buy and 3 Hold recommendations, NVDA holds a Strong Buy consensus rating. Its 12-month average price target of $177.08 suggests ~32% potential gains over the next year. (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.
