Analyst Explains Why His Firm Has Sold Its Entire Nvidia (NVDA) Position

Companies in general and the large cloud infrastructure providers in particular may spend less on Nvidia’s (NVDA) chips going forward, Ali Mogharabi, Senior Equity Analyst for WestEnd Capital Management said on Schwab Network yesterday. The transition that’s being made from training computers for AI to using them for inference will enable these firms to spend less on Nvidia’s “most recent, most powerful chips,” Mogharabi theorized.

Against that background, WestEnd has sold all of its NVDA stock, he noted.

Other negative catalysts for the chip maker include the fact that the large cloud companies are making their own chips and continued geopolitical issues that could place downward pressure on the multiple of NVDA stock, the analyst stated. Amid all of these factors, along with other macro uncertainties, NVDA’s growth could “decelerate very rapidly,” the analyst suggested.

Mogharabi indicated that he would consider buying the stock again if it falls below $100. Such a price would be “low enough to account for how pressured the valuation multiples are for various reasons,” he explained. “The slowdown in demand from the cloud providers” for NVDA’s newest chips “could be priced in at that level,” the analyst added.

While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is as promising as NVDA but trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires

Disclosure: None. This article is originally published at Insider Monkey.