The Future of NVIDIA: Analyst Lowers Recommendation

NVIDIA has seen a decline in the growth momentum it achieved since the beginning of last year,
at least for now, according to analyst Pierre Ferragu of New Street Research.

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A Rare Occurrence

Details

Ferragu downgraded his recommendation for the company’s stock, which focuses on manufacturing AI chips, from “Buy” to “Neutral,” explaining that the stock “has reached full valuation” after rising 156% this year, in addition to gains of around 240% in 2023. The stock fell as much as 2% on Friday, compared to a gain of about 1% for the Nasdaq 100 index.

Ferragu noted that additional stock gains “will only materialize if post-2025 expectations increase significantly,” adding, “We do not have confidence that this scenario will occur.” He added that although “the brand’s quality remains intact,” there is a “risk of deterioration” if current expectations remain unchanged.

A Rare Occurrence

Downgrading the recommendation is rare for a company that has significantly benefited from the AI spending boom. About 90% of analysts tracked by Bloomberg recommend buying the stock. NVIDIA’s stock is currently trading at about 23 times the projected revenue for the next 12 months, making it the most expensive stock in the S&P 500 index by this measure. The stock is also the second-best performer among the index’s components this year, trailing only Super Micro Computer Inc., another favorite among AI investors.

This rise added $1.9 trillion to NVIDIA’s market value, briefly making it the world’s largest company by market capitalization.

The Future of NVIDIA: Analyst Lowers Recommendation

The Future of NVIDIA: Analyst Lowers Recommendation

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