Nvidia (NASDAQ: NVDA) has enjoyed significant favor on Wall Street, with its stock soaring over the past year. However, not everyone shares the same bullish sentiment. Analyst Gil Luria from D.A. Davidson has projected a nearly 28% decline in Nvidia’s stock over the next 12 months, setting a price target of $620, well below its current trading price of approximately $864.
Luria’s bearish outlook stems from concerns about a potential shift in spending patterns among major tech companies, including Google parent Alphabet, Amazon, Meta Platforms, and Microsoft. He anticipates that these companies will eventually reach saturation in GPU capacity for generative AI, as they increasingly develop their own AI chips. This sentiment is echoed by others in the industry, including Richard Hunter from Interactive Investor and Aswath Damodaran, a finance professor at NYU.
Despite these warnings, Nvidia remains highly regarded by many analysts, with a significant portion rating the stock as a buy or strong buy. The company’s GPUs have been in high demand, particularly in the AI sector, where they play a crucial role in model training. However, questions linger about the sustainability of this demand and the longevity of Nvidia’s dominance in the GPU market.
While Nvidia’s stock has become increasingly expensive, driven by its strong performance and market demand, investors are cautioned to consider the company’s long-term prospects rather than short-term market sentiment. The potential for innovation and continued demand in the AI sector may support Nvidia’s growth trajectory, but investors should remain vigilant and assess the stock’s valuation accordingly.
