Nvidia (NASDAQ:NVDA) isn’t just following the AI trend – it’s driving it. Its explosive revenue growth and expanding margins have been driven by a surge in capital spending from hyperscalers racing to build AI infrastructure.
Yet, despite these strong fundamentals, the stock is down about 19% so far this year – a reminder that even market leaders can face turbulence amid shifting investor sentiment. Concerns over a potential slowdown in spending, among larger geopolitical concerns, have contributed to this reversal.
Stepping into this evolving landscape is CoreWeave – a cloud computing firm with data centers across the U.S. and Europe that just made its public market debut. It’s already landed major clients like Meta, IBM, and Nvidia. In fact, by the end of 2024, Nvidia had supplied CoreWeave with over 250,000 GPUs and owns a 6% stake in the company.
One investor, known by the pseudonym Bluesea Research, believes that the outcome of the IPO will be a “big test for Nvidia and the entire AI industry.” Thus far, the investor is none too pleased.
“A big correction from the $40 price target for CoreWeave IPO in the next few days could significantly hurt the sentiment towards Nvidia stock,” explains the investor.
CoreWeave has already scaled back expectations – cutting its IPO price target by over 25% and shrinking the size of its offering by 23.5%. According to Bluesea, neither move bodes well, particularly given that Nvidia and OpenAI were lined up as anchor investors.
To Bluesea, this provides further evidence that AI capex investments will be dropping in the near future, as hyperscalers work to “reduce their AI spending for a few quarters while they build more efficient AI tools.” The investor notes that the exceptionally large AI expenditures among the major tech companies have yet to lead to commensurate increases in revenues.
Bluesea concludes that the overall sentiment regarding demand for Nvidia’s products will wane, and is therefore assigning NVDA shares a Sell rating. (To watch Bluesea Research’s track record, click here)
Wall Street, on the other hand, is not rushing to abandon Nvidia – quite the opposite. With 39 Buy and 3 Hold ratings, NVDA boasts a Strong Buy consensus rating. Its 12-month average price target of $176.54 would translate into gains of ~63% in the year ahead. (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.