The future of NVIDIA Corp NVDA stock might not be as promising as its recent performance suggests, according to a prominent analyst.
What Happened: DA Davidson analyst Gil Luria has cautioned that Nvidia’s stock might not be able to sustain its meteoric rise due to a potential decline in demand for its GPUs, according to an interview on BNN Bloomberg.
Luria predicts that Nvidia’s profits for the last quarter will exceed $25 billion. However, he foresees a long-term decline for the chipmaker as it faces increasing competition, even from its own major customers.
“The reason we’re not quite as bullish as everybody else is we’re looking at the horizon. What’s going to happen next year? What’s going to happen in 2026? We think there’s accumulating more and more evidence this can’t continue,” Luria said. “Whenever one company extracts this much profit out of the market, competition does come in, and in Nvidia’s case, it’s coming in from its customers.
He noted that the majority of Nvidia’s business comes from its five largest customers, including Amazon, Meta, Microsoft, Alphabet, and Tesla, all of which are also major players in the AI sector. These firms are reportedly developing their own AI chips, posing a potential threat to Nvidia’s future.
Luria also pointed out that despite some customers stockpiling Nvidia’s GPUs, demand is likely to taper off eventually, leading to a decline in revenue. This could catch investors off guard, potentially resulting in a significant drop in the stock price.
Why It Matters: The warning from Luria comes at a time when Nvidia’s stock has been the subject of much discussion. The company’s stock has been on a remarkable rise, with a 240% surge in 2023 and an additional 80% increase in 2024.
This has led to a debate among investors on whether to buy now or wait for a potential drop in the stock price. The recent performance of Nvidia’s stock has sparked a debate among fund managers. Some, like Trent Masters, a portfolio manager at Alphinity Investment Management, suggest that the stock is still a good buy despite its significant rise. He points to the chipmaker’s strong market share and sustainable earnings as reasons for his bullish stance.
On the other hand, Luria’s warning is not the only one to have been issued recently. Chinese regulators have reportedly instructed local tech firms, including TikTok parent ByteDance, Tencent Holding Ltd, Alibaba Group Holding Limited, and Baidu Inc, to reduce their consumption of Nvidia’s AI chips and invest in more domestically made AI chips instead. This could potentially impact Nvidia’s future business in China.
However, not all analysts share Luria’s caution. HSBC Global Research recently maintained Nvidia with a Buy rating and lifted its 12-month price target, suggesting that the chipmaker’s strong pricing power will allow it to continue delivering upside surprises through fiscal-year 2026.
Despite the warnings, some analysts remain optimistic about Nvidia’s future. KeyBanc analyst John Vinh maintained an Overweight rating on Nvidia and a price target of $1,200, expecting Nvidia to report fiscal first-quarter results and second-quarter guidance meaningfully above expectations.
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