‘Time to Hit Pause on This Fairy Tale,’ Says Top Investor About Nvidia Stock

Nvidia (NASDAQ:NVDA) stock has followed a true Wall Street fairy tale this year, with plenty of twists and turns. While the company’s growth story has largely held strong, its golden path to riches has meandered through some shadowy terrain along the way.

Global trade shocks, a U.S.-China spat, and worries about the future of AI spending have all taken turns spooking investors. And yet, in spite of all the potential pitfalls, last week Nvidia announced another stellar earnings report, outpacing both top- and bottom-line expectations.

Was this just another indication that Nvidia remains an unstoppable hero on a white horse, destined for more revenues, profits, and happy shareholders in the years ahead?

Not necessarily, according to one top investor, known by the pseudonym JR Research. The 5-star investor thinks the time has come to take the foot off the gas pedal and downshift into neutral.

“We should not expect Nvidia to replicate its explosive surge over the past two years,” posits JR, who is among the top 2% of TipRanks’ stock pros.

JR explains that the company will need to generate some “big moves” in order to drive explosive growth for its share price, as the law of large numbers increasingly comes into play. While these could come in the form of bigger AI chip commitments, AI clusters, and AI factories, the investor does not believe these developments are a given.

JR reminds investors that AI capex among the hyperscalers is likely peaking in 2024-2025, meaning that overall spending will be sinking in years to come.

The investor also notes that Nvidia’s revenues are increasingly concentrated in its data center segment, which grew by leaps and bounds to $132 billion in the trailing twelve months (essentially doubling from the same period last year). This made up almost 90% of Nvidia’s revenues – leaving the company susceptible to slowing growth if its other segments can’t pull their weight.

“I don’t think the market will be keen to push through the valuation optimism through its data center business much further,” adds JR.

Moreover, the challenges to the company’s China business are facing geopolitical threats, while Huawei is poised to bite off a big chunk of the company’s revenues.

The bottom line? Nvidia’s growth engine isn’t stalling just yet, but the road ahead looks far less enchanted than before.

“I believe the market is positioning for a growth deceleration phase that could see the stock trade sideways/consolidate as it undergoes a digestion,” concludes JR Research, who gives NVDA shares a Hold (i.e. Neutral) rating. (To watch JR Research’s track record, click here)

On the other hand, Wall Street’s love affair with NVDA is far from over. With 36 Buy, 4 Hold, and 1 Sell recommendations, NVDA continues to enjoy a Strong Buy consensus rating. Its 12-month average price target of $173.19 implies a potential upside of ~23%. (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.