Nvidia, the AI semiconductor company on a rapid run, has hit a roadblock.
Concerns of overvaluation were raised for Nvidia, which had been suppressing the market outlook with its tremendous performance, settling concerns of overvaluation despite its steep stock price rise.
Nvidia continued to receive daily buy recommendations and upward adjustment of target stock price, raising concerns about whether it is slowly reaching its peak.
The downgrade of analysts’ recommendations may have just begun.
From Buy to Neutral
The first runner to make an issue of Nvidia’s target stock price increase is Pierre Ferragu, an analyst at New Street Research.
In his analysis note on the 5th (local time), Ferragu judged that Nvidia rose as much as it could.
He stated, “Nvidia’s stock price rise will only be possible when the bullish scenario becomes a reality.”
The bullish scenario Ferragu proposed is based on the assumption that Nvidia’s performance will improve even after 2025.
Analysts predict that Nvidia will continue to show rapid performance growth until next year while further outlook has not yet been reported.
Ferragu judged that the performance improvement after next year should be guaranteed for Nvidia’s stock price to rise further.
Moreover, he added that there are no signs yet that such an optimistic scenario will become a reality.
Ferragu evaluated that although Nvidia is still the strongest player in the AI data center market, such short-term expectations have already been reflected in the stock price.
He downgraded Nvidia’s recommendation from buy to neutral.
The target price was set at $135.
On the 5th, when Ferragu’s pessimistic outlook was reported, Nvidia’s stock price closed at $125.83, down $2.45 (1.91%).
Nvidia showed a decline of less than 1% until 30 minutes before the market closed, and saw a sudden increase in selling pressure just before the close, followed by a rapid drop approaching 2%.
Samsung Electronics
On the other hand, Richard Windsor, an independent analyst who publishes Radio Free Mobile, reaffirmed his optimistic outlook for Nvidia on the same day.
According to Barron’s, the basis for Windsor’s optimistic outlook was Samsung Electronics.
He emphasized that Samsung Electronics’ optimistic outlook of $7.54 billion in the second quarter operating profit in its preliminary earnings announcement held on the 5th proves that the AI party is still ongoing.
Samsung Electronics’ operating profit is nearly 16 times higher than that of the same period last year.
Windsor is optimistic that Nvidia will replicate a surprising story like Samsung Electronics in its next quarterly earnings announcement.
According to TipRanks, Nvidia will announce its quarterly results after the market closes on August 15.
Most Wall Street institutional investors, including Bank of America (BofA), believe that Nvidia still has room to rise.
Meanwhile, Nvidia’s stock price is soaring.
After soaring nearly 240% last year, it rose 154% this year.
The stock price, which had been moving sideways in the second quarter, rebounded on May 22, the day of the quarterly earnings announcement. Nvidia returned to a soaring trend with overwhelming quarterly results that greatly exceeded the heightened market expectations and the 10-to-1 stock split announcement.
Since then, Nvidia’s stock price soared 32.5% until the 5th.
Investors expect that the next-generation AI semiconductor Blackwell, which Nvidia will launch in the second half of this year, will lead to an additional leap for Nvidia.
