Wall Street Downgrades Nvidia Due to Valuation Concerns

At Extreme Investor Network, we are constantly monitoring the latest trends and developments in the world of investing. Today, we want to discuss the recent alarm raised by New Street Research regarding shares of Nvidia, the chip giant that has seen a significant rally in June.

Analyst Pierre Ferragu has downgraded Nvidia to neutral, citing limited upside potential. While the stock has surged 159% so far this year, fueled by advancements in artificial intelligence and the debut of ChatGPT, Ferragu believes that the outlook beyond 2025 is uncertain. He notes that revenue growth is expected to slow to a mid-teen rate, with graphics process unit revenues rising only 35% next year.

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This contrarian view on Nvidia is rare on Wall Street, where 38 out of 41 analysts covering the stock have a buy rating. However, New Street Research has set a $135 price target for Nvidia, assuming a multiple of 35 times, which suggests a 5% upside from the current price.

Ferragu also warns that Nvidia’s current price-earnings multiple of 40 times earnings may be at risk of contracting, as it has previously dropped to 20 times when growth slowed down. Despite this, he believes that the quality of Nvidia’s franchise remains strong and would consider buying again on prolonged weakness.

At Extreme Investor Network, we believe in providing valuable insights and analysis to help investors navigate the complex world of the stock market. Stay tuned for more updates and recommendations to help you make informed investment decisions.

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