Nvidia (NASDAQ:NVDA) has been at the center of the AI boom, with its recent Q4 earnings report once again showcasing strong revenue growth and elevated margins. While the company continues to benefit from AI-driven demand, some investors are beginning to question how long this momentum can last.
One such skeptic is investor David Ksir, who warns that Nvidia’s soaring trajectory may not be sustainable as the AI spending frenzy begins to fizzle.
“With no clear way to monetize AI in the near term, there is a real risk that earnings will decline over time,” states the investor.
Ksir justifies this view by explaining that AI has yet to deliver “substantial earnings growth”‘ for large corporations. Moreover, the investor interprets the low adoption rates of AI across the broader economy as a sign that the vast majority of companies will not be making profits on AI anytime soon.
“The one exception to this are, of course, chip manufactures that stand at the very start of the AI supply chain. As a result, they don’t need the technology to translate into profits,” adds the investor. “All they need is enough hype so that companies (mainly the hyper-scalers) feel the FOMO and pre-order their chips in order to not be left out.”
While this has served Nvidia well, Ksir does not believe that the trend will continue beyond the short to medium-term. The investor cites a Goldman Sachs study that forecasts U.S. AI hardware investments will peak in 2026 at $430 billion, before leveling off to $280 billion in 2028 and $155 billion in 2032. Global spending should begin to taper off as well, notes Ksir, sinking from $615 billion in 2026 to $439 billion in 2028 to $243 billion in 2032.
The investor argues that these figures represent the maximum limit for NVDA’s AI chip revenues, which should sow some doubts regarding the consensus estimates of Nvidia’s 2032 revenues reaching $377 billion.
Adding to the concern, Ksir also challenges the assumption that Nvidia can maintain its stranglehold on 90% of the data center market indefinitely. If competition starts chipping away at that dominance, he believes share prices will inevitably take a hit.
How low might they go? Ksir believes that the fair value of NVDA is actually $45 a share, a potential 60% drop from current levels. Unsurprisingly, Ksir rates NVDA shares a Sell. (To watch Ksir’s track record, click here)
Wall Street couldn’t disagree more vehemently. With 39 Buy and 3 Hold ratings, NVDA retains a Strong Buy consensus rating. Its 12-month average price target of $177.41 suggests 59% upside for the next 12 months. (See NVDA 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.