Since the start of the artificial intelligence (AI) craze, Nvidia has been racing on its own, but more and more analysts are warning that such a rise in the stock cannot last forever.
Gil Luria, an analyst at investment bank DA Davidson, is one of them.
He said it is not surprising that the latest performance report of this chip manufacturer exceeded Wall Street's expectations. Luria stated that the company's first quarter revenue just hit a record of $26 billion, but this was mainly due to Nvidia's top customers increasing their spending on its GPU products.
But Luria predicts that this trend will shake, and he predicts that the stock price of this chip manufacturer will experience a double-digit decline in the next 18 months. He estimates that by 2026, Nvidia's stock price may drop to around $900, which means its stock price will fall by about 15% from current levels, and in a more pessimistic scenario, the decline could be as high as 20%.
"My forecast for 2026 is the lowest on Wall Street," Luria said. "I admit that the short-term outlook is very good, but the long-term outlook may be even worse than most people expect."
Reduced market dependence
Luria further explained that Nvidia's largest customers include Meta Technology giants such as Alphabet and Amazon are already developing their own artificial intelligence chips or investing in other partners. This means that over time, their dependence on Nvidia may weaken.
"This is not a secret, nor is it a guess. This is something that these companies are already discussing. It takes time. This is not something that will happen in 2024, as they need time to produce, write software, and adapt customers to alternative solutions. But this does mean that it should have a greater impact in the next year or two."
Luria stated that once Nvidia's main customers - including Amazon Alphabet, Meta, and Tesla have started to withdraw their investments, and he will give the stock a "sell" rating.
Coincidentally, Rob Arnott, the legendary investor and chairman of the investment institution Research Associates, warned last week that Nvidia's stock looks more like a foam, and pointed out that the company's success in the market is based on the idea that it will continue to dominate the semiconductor industry in the future.
He also mentioned the issue of competition and said, "So,...", AMD、 Will Intel and TSMC sit down and say, 'Oh, you can maintain a profit margin of over 50%?'. You can retain over 90% of the market share. Don't worry; No, they all have to participate.