Nvidia’s (NASDAQ:NVDA) meteoric rise to the top of both the stock market and the tech zeitgeist has been fast and furious. As a leading AI chipmaker, the company has played a pivotal role in driving the AI revolution, with the world’s top tech firms among its key customers.
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Since the launch of ChatGPT in November 2022, Nvidia has showcased its dominance by delivering earnings reports that far exceeded expectations, along with consistently optimistic projections for the future.
In 2024 alone, Nvidia’s stock has skyrocketed 172%, and CEO Jensen Huang has further fueled investor enthusiasm by highlighting “insane demand” for its Blackwell GPU.
This begs the question, however, of how much longer Nvidia can continue on this blistering path? For one top investor known the pseudonym The Value Portfolio, the past does not appear to be prologue when it comes to Nvidia.
“Nvidia needs strong growth to justify its valuation, and Blackwell can’t provide it forever,” writes the investor, who sits in the top 1% of all TipRanks’ stock pros.
While acknowledging Nvidia’s incredible track record, Value Portfolio simply does not envision a scenario where Nvidia can recreate the performance required to justify buying in at current prices.
“Nvidia’s valuation demands doubling past five-year growth in the next eight years to match S&P 500 returns, posing a high growth bar,” the investor notes.
The Value Portfolio cites some additional reasons for doubt, including the small concentration of megascalers who make up the bulk of Nvidia’s profits.
“If you have five customers driving your business, and you need 4x the revenue to justify your valuation and match the S&P 500, unless new mega cap tech companies show up with the same opinion, those customers need to order 4x as much,” the investor explained.
In addition, rather than being content to support Nvidia’s 75% margins, some of these megascalers are attempting to build their own GPUs, which could significantly reduce Nvidia’s pricing power.
Adding to these concerns, the investor points to doubts about the returns on AI investments, echoing recent caution from Goldman Sachs, which has tempered previous bullish expectations.
“As the tech of customers catches up and they realize returns are lower than expected, Nvidia too will suffer, making it a poor investment,” concludes Value Portfolio, which has a Sell rating on Nvidia shares.(To watch Value Portfolio’s track record, click here)
Despite this skepticism, The Value Portfolio remains an outlier. Wall Street’s consensus on Nvidia is overwhelmingly bullish, with a Strong Buy rating based on 39 Buy recommendations and just 3 Holds. The average 12-month price target of $152.44 suggests a potential 13% upside. (See NVDA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
