‘Time to Take Profits,’ Says Top Investor About Nvidia Stock
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‘Time to Take Profits,’ Says Top Investor About Nvidia Stock

Nvidia (NASDAQ:NVDA) is riding a strong wave of positive momentum, with favorable news coming from all directions. The AI chip giant continues to dominate the data center market, and with its new Blackwell chipsets already sold out for the upcoming year, Nvidia shows no signs of slowing down.

In addition, Nvidia’s upcoming inclusion in the Dow Jones Industrial Average this Friday is set to drive further gains, as index-tracking funds will need to add NVDA shares to their portfolios, potentially lifting the stock even higher.

However, for one top investor, known by the pseudonym The Value Portfolio, this latest development is a good opportunity to lock in some profits.

“Nvidia’s inclusion in the DJI, which will force ETF buying, potentially pushing the company back to all-time highs, is a great time to exit,” writes the 5-star investor, who sits in the top 1% of the Street’s stock pros.

The Value Portfolio cautions that NVDA’s current valuation doesn’t align with its growth prospects. Nvidia would need to sustain an annualized 55% revenue growth over the next six years – a challenging feat for a company already valued at $3.4 trillion – to justify further share price increases.

There are a few reasons for the investor’s pessimism. First, AMD may start eroding NVDA’s market share. As evidence, Value Portfolio points to Meta, one of Nvidia’s largest customers, which has recently begun running open-source models on AMD servers. To Value Portfolio, this shift suggests Nvidia’s moat may not be as robust as previously thought, while highlighting AMD GPUs as a cost-effective alternative.

Another concern for the investor is that the vast majority of NVDA’s revenue comes from just a handful of customers, who all happen to be other mega tech companies. This poses a danger for NVDA, as their clientele could very well succeed in developing some of these capabilities themselves.

“This competition from its largest customers, who work directly with the end models, unlike Nvidia, could place a massive threat to Nvidia’s margins,” the investor added.

To this end, The Value Portfolio has assigned a Strong Sell rating to NVDA shares, encouraging investors to capitalize on the current price bump. (To watch The Value Portfolio’s track record, click here)

The Value Portfolio’s view sharply contrasts with the broader Wall Street sentiment. With 39 Buy ratings and 3 Holds, NVDA enjoys a consensus Strong Buy rating. Its 12-month average price target of $153.86 suggests potential gains of 13% over the next year. (See NVDA stock forecast)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

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.

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