Nvidia (NASDAQ:NVDA) has attained its status as the world’s most valuable company by catering to the insatiable appetite for its best-in-class AI chips, with the stock riding the momentum of continued growth in both revenue and profits.
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But while most take an optimistic view of the chip giant’s prospects, an investor who goes by the nom de plume of ValueAnalyst thinks the market is not taking into account two “significant challenges” that are about to play out.
One is a coming “profit problem.” ValueAnalyst points to a recent MIT study The GenAI Divide: State of AI in Business 2025, which found that just around 5% of AI pilot projects deliver quick revenue growth, while the majority show little to no effect on P&L (profit and loss).
“My interpretation of this study is that, whereas GPU demand from Microsoft, Meta Platforms, and other hyperscalers may support Nvidia’s top-line and bottom-line fundamentals in the near term, enterprise demand remains unlikely to backfill any air pockets from slowing hyperscaler demand in the future,” the investor went on to say.
The other big issue Nvidia faces is one of power, or more to the point, a lack of it. AI investors expect years of strong revenue and profit growth, but ValueAnalyst says the U.S. power grid cannot support the projections. For instance, the investor points to OpenAI’s September 2025 announcement with Oracle and SoftBank that touted plans for 10 GW of data centers, yet only 1.5 GW is slated within the next 18 months, with no timeline for the rest. ValueAnalyst’s takeaway is that despite “grandiose announcements” of massive capex and tens of gigawatts, today’s limited buildout in the low single digits means only a handful of companies will see meaningful profits. Even if chipmakers can supply GPUs and tech leaders can raise the capital for tens of gigawatts of data centers, multi-year interconnection delays and soaring power costs make these projects economically unfeasible anytime soon.
Apart from those two issues, ValueAnalyst also believes Nvidia’s profit margins are about to contract. If hyperscalers pull back on AI spending and enterprise demand doesn’t compensate, the investor anticipates Nvidia’s net profit margin will fall from 52% over the past year to a more typical historical level in the periods ahead.
Bottom line, ValueAnalyst has downgraded his NVDA rating from Sell to Strong Sell, backed by a $100 price target. This implies NVDA shares will shed 46% in the months ahead. (To watch ValueAnalyst’s track record, click here)
It’s a contrarian stance, to say the least. Wall Street, however, is far more upbeat: based on a mix of 36 Buys, 2 Holds, and 1 Sell, the stock carries a Strong Buy consensus rating. With an average price target of $217.75, analysts are calling for ~17% upside over the next 12 months. (See NVDA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.