Source: Wall Street See
Almost all analysts on Wall Street are optimistic about NVIDIA, but Pierre Ferragu, an analyst at New Street Research, has issued a warning about NVIDIA's stock. He believes that unless it is a bull market, NVIDIA's future upward space is limited, so he downgraded the rating to neutral. In addition, he set a target stock price of $135 for NVIDIA, which is 5% higher than Wednesday's closing price. He said that NVIDIA's current P/E ratio may be too high, but NVIDIA's fundamental quality has not changed and he would only recommend buying during the continued low stock price. NVIDIA is also facing regulatory pressure from the EU and concerns about its dominant position in the AI chip market causing EU antitrust concerns.
Analyst Pierre Ferragu believes that $NVIDIA (NVDA.US)$valuation is worrying.
On Friday, July 5, Eastern Time, analyst Pierre Ferragu from New Street Research issued a warning on NVIDIA's stock. He downgraded the stock to "neutral" and believed that the stock's upside potential was limited unless it was in a bull market.
In his report, he wrote:
"We are downgrading the stock to neutral today because there is only upside space in bull markets, notably from 2025 onwards when the outlook is significantly brighter and we are not sure this will materialise at this point."
He also mentioned that the revenue model showed that NVIDIA's growth rate would slow to a moderate level, and GPU revenue is expected to grow by only 35% next year.
Based on NVIDIA's price-earnings ratio in 2019 and early 2020 (35 times), Ferragu set a target stock price of $135, which is 5% higher than Wednesday's closing price. Ferragu further pointed out that NVIDIA's P/E ratio may fall, as the current stock price is 40 times the expected earnings in the next 12 months. When the growth slowed to 10% in 2019, the P/E ratio fell to 20 times.
Nevertheless, he believes that the company's fundamental quality is still good, and he will only consider buying again when NVIDIA's stock price continues to be low.
Currently, there are very few analysts on Wall Street who hold negative views on NVIDIA. According to TipRanks.com, among 41 analysts, 38 recommended buying NVIDIA's stock, 3 suggested holding, and no one suggested selling. Only DZ Bank in Germany downgraded NVIDIA's rating from buy to hold in May of this year.
Despite the overwhelmingly positive views of almost all analysts on NVIDIA, New Street Research is a rare analyst who is bearish on NVIDIA.
Thanks to the launch of ChatGPT at the end of 2022, it has sparked an AI technology boom. Since this year, NVIDIA's stock price has risen by 159%. However, in recent weeks, NVIDIA's stock price has fallen back because some investors chose to lock in profits. On Friday, NVIDIA's stock price fell nearly 2% overnight.
In contrast to NVIDIA, New Street is bullish on AMD and TSMC, citing their positive growth trends and attractive valuations. In a report, New Street mentioned:
"AMD and TSMC are the best investment choices in the industry. Both companies have strong upward space in both basic scenarios (normal market conditions) and high scenarios (exceptionally good market performance). In addition, Broadcom, Arista Networks, and Micron Technology also have "attractive" valuations.
Moreover, NVIDIA has become the preferred choice of many data centers, with over 80% market share of H100, its flagship product. It has attracted a lot of attention from regulatory agencies in many countries. For example, NVIDIA is facing potential regulation from the EU.
Margrethe Vestager, Vice President and Competition Commissioner of the European Union, warned during a visit to Singapore to attend an AI conference that NVIDIA's AI chip supply is seriously bottlenecked. She said:
"The EU is considering whether to take action against NVIDIA, but it is only in the preliminary stage and there has not yet been any real regulatory action."
Earlier this week, there was news that France plans to launch an antitrust lawsuit against NVIDIA, accusing it of using its dominant market position and expressing concerns about the deep dependence of the AI industry on CUDA programming tools. Last year, the French minister pointed out that NVIDIA's dominance in the AI chip market intensified international inequality, suppressed market competition, and data showed that NVIDIA occupied 92% of the GPU market.
Analysts believe that the EU's antitrust measures reflect concerns about the dominance of US tech giants in new technology areas. The lack of investment and research and development by European companies has resulted in slower growth rates compared to the US.
Editor/Lambor