According to Pierre Ferrague, an analyst at New Street Research, Nvidia’s stock price has finally run out of fuel for further gains since early last year, Bloomberg reported.
New Street Research’s Ferrag downgraded Nvidia’s stock to neutral from buy, calling it “fully valued.” The chip giant’s shares have risen 154% this year and 240% in 2023, a year earlier.
Nvidia shares fell 1.9% in Friday’s trading session, while the Nasdaq 100 index was up 1% as of Friday.
“That would only happen in a bullish scenario in which the outlook improves substantially beyond 2025, but we’re not yet confident that this scenario will come to fruition,” Bloomberg wrote, citing Ferrag’s further gains.
Ferragu also said the quality of the franchise remains intact, but that if anything were to happen, the current outlook would remain unchanged, even if there was a risk of a downgrade in valuation.
In 2024, Nvidia is set to be the second-best performing S&P 500 company this year, behind only Supermicro Computer Inc., a favorite among chip and AI investors.
Nvidia’s stock price surge added $1.9 trillion to the chipmaker’s market capitalization, briefly making it the largest company in the world.
It’s unusual for analysts to downgrade a stock like Nvidia, which is part of the artificial intelligence boom. Bloomberg reported that 90% of analysts have recommended buying the stock, even as most have concerns about its valuation.
The chipmaker’s shares trade at more than 22 times next year’s expected sales, making it the most expensive stock in the S&P 500 index by that measure.
Nvidia plans to ship more than 1 million units of its new H20 product to the Chinese market, said to be priced at $12,000 to $13,000 apiece, which could generate more than $12 billion in profits for the chipmaker, The Register reported, citing a report by SemiAnalysis. Nvidia declined to comment publicly on the deal.
New Street Research set its one-year price target for Nvidia at $135, up from Friday’s closing price of $125.82. The analyst firm has a positive view on stocks such as Advanced Micro Devices Inc. and Taiwan Semiconductor Manufacturing Co. Ltd., citing favorable valuations and growth trends.
New Street Research said AMD and TSMC are the best stocks to own in this group, with big upside potential in both its base and high case scenarios. Stocks like Broadcom, Arista Networks and Micron Technology all “continue to be attractively valued,” the firm said.
