① DA Davidson analyst Gil Luria believes that Nvidia's stock price cannot keep rising forever; ② he expects Nvidia's stock price to drop by up to 20% over the next year and a half; ③ he also anticipates that market demand for Nvidia GPUs will decline, and competition will become more intense.
Since the beginning of the artificial intelligence (AI) boom,$NVIDIA (NVDA.US)$It has been “going wild all the way on its own,” but more and more analysts are warning that the stock's rise cannot last forever.
Investment bank DA Davidson analyst Gil Luria is one of them.
He said it's not surprising that the chipmaker's latest performance report has surpassed Wall Street expectations. Luria said the company's revenue for the first fiscal quarter just hit a record of 26 billion US dollars, but this was mainly due to Nvidia's top customers increasing spending on their GPU products.
However, Luria predicts that this trend will waver, and he expects the chipmaker's stock price to drop by double digits within the next 18 months. He estimates that by 2026, Nvidia's stock price may fall to around $900, which means that its stock price will drop by about 15% from current levels, and in a more pessimistic situation, the decline may be as high as 20%.
“My prediction for 2026 is the lowest on Wall Street,” Luria said. “I acknowledge that the short-term outlook is excellent, but the long-term outlook is probably worse than most people expected.”
Decrease in market dependency
Luria further explained that Nvidia's biggest customers include tech giants such as Meta, Alphabet, and Amazon, which are already developing their own artificial intelligence chips or investing in other partners. That means their dependence on Nvidia is likely to wane over time.
“It's not a secret, nor a guess. This is something these companies are already discussing. This takes time. This isn't something that will happen in 2024 because they take time to produce, write software, and adapt customers to alternatives. But that really means it should have a bigger impact in the next year or two.”
Luria said that once Nvidia's main customers — including Amazon, Alphabet, Meta, and Tesla — begin divesting, he will give the stock a “sell” rating.
Coincidentally, legendary investor Rob Arnott (Rob Arnott), chairman of the investment agency Research Affiliates, warned last week that Nvidia's stock looked more like a bubble, and pointed out that the company's success in the market was based on the idea that it would continue to dominate the semiconductor industry in the future.
He also mentioned competition issues and said, “So, will AMD, Intel, and TSMC sit down and say, 'Oh, you can keep profit margins above 50%. You can keep 90% or more of the market share. Don't worry'; they won't, they all have to get involved”.
Editor/Jeffrey