NVIDIA (NASDAQ:NVDA) The stock has recently taken a breather, falling 27% from its all-time high in June and hitting a historic low on Aug. 7. But the AI chip giant has since recovered, rising 17%. Investors may now be looking at this as a good opportunity to get back in before the next upswing.
But not everyone agrees. Investor Oriental Trader is boldly arguing against the bullish public opinion that has propelled Nvidia into the ranks of the world’s most valuable companies, saying it thinks Nvidia’s time is over. The firm argues that Nvidia’s stock is “significantly overvalued at its current market cap” and believes “it’s probably only just beginning to recover.”
So what’s driving this bearish view? A number of factors are at play. OT draws parallels with Intel’s struggles and suggests Nvidia could face similar challenges. Many believe Nvidia will face limited competition for an extended period of time, and a similar argument was made about Intel at one time, but competitors eventually caught up and Intel’s valuation returned to levels in line with profits and normal market demand.
Another bearish argument is that all this investment in AI ultimately needs to show results – profits – and as the focus shifts increasingly to revenue, Nvidia’s customers could reduce demand or pressure it to lower prices.
Additionally, Warren Buffett’s sale of most of his Apple shares in the second quarter may signal bearish sentiment for the industry as a whole, even though he doesn’t own any Nvidia shares. Given Buffett’s influence in the investment community, his actions could affect market sentiment.
At the same time, investors shouldn’t get excited about the prospect of the Fed lowering interest rates as a relief measure: Based on past business cycles, OT said, “lower interest rates, in and of themselves, do not guarantee higher stock prices.”
Taking all this into consideration, OT rates NVDA shares a “Strong Sell.” (To watch Oriental Trader’s track record, click here)
However, OT’s view has little support among Wall Street analysts. NVDA stock asserts a strong buy consensus rating based on a skewed combination of 37 buys and 4 holds. Over the next 12 months, the stock is expected to rise 24% given the average price target of $144.17. Nvidia stock price prediction)
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Disclaimer: The opinions expressed in this article are solely those of the featured investors. The content is for informational purposes only. It is extremely important that you always conduct your own analysis before making any investment.
