4. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 186
NVIDIA Corp (NASDAQ:NVDA) shares are on the decline amid valuation concerns. However, Morgan Stanley re-added the stock to its top picks list. Analyst Joseph Moore said:
“Visibility will actually increase as demand moves from Hopper to Blackwell, as the constraint will shift back to silicon; H100 lead times are short, but H200 lead times are already long, and Blackwell should be even longer,” the firm said.
However, the latest big tech earnings have raised some concerns on NVIDIA Corp (NASDAQ:NVDA) future growth trajectory. The company’s major customers including Meta Platforms and Alphabet have indicated that they may be overbuilding and overspending on AI chips. NVIDIA Corp (NASDAQ:NVDA) is selling about 2 million of its GPUs on an annual basis based on 2023 data. As demand moderates and competitors up their production, the company won’t be able to sustain its current growth trajectory.
Raymond James analyst Javed Mirza recently said in a report that NVDA has “triggered a mechanical sell signal” based on a moving average convergence/divergence indicator. In a technical analysis report, he stated that the stock is trading below its 50-day moving average and exhibiting early signs of selling pressure. This, according to Mirza, shows there is a looming corrective phase lasting 1-3 months. He added that a sustained break below the 50-day moving average could lead to a decline towards 94.94, representing a further 16.9% drop from current levels.
NVIDIA Corp (NASDAQ:NVDA) rapid run and soaring valuation have started to make some circles on Wall Street uneasy. New Street Research recently downgraded the stock to Neutral from Buy and set the stock’s price target at $135.
“We downgrade the stock to Neutral today, as upside will only materialize in a bull case, in which the outlook beyond 2025 increases materially, and we do not have the conviction on this scenario playing out yet.” New Street analyst Pierre Ferragu said.
NYU professor and valuation guru Aswath Damodoran has also been skeptical about NVDA over the past several months, saying repeatedly that the stock looks overvalued. In March, when he was asked about his previous predictions (that proved wrong) about NVDA valuation, the professor said that either he has “no idea what I’m talking about” or it’s the market that just does not understand.
Aswath Damodoran at the time said that while Nvidia was in the “driving seat” of the AI bandwagon, its path to profits won’t be as easy as the market assumes.
Patient Capital Opportunity Equity Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) continued to lead both the market and the portfolio, remaining a top performer in the period gaining 36.7%. Nvidia is the market leader in designing and selling Graphics Processing Units (GPU), which has recently benefited from the insatiable demand of artificial intelligence (AI) models. The company currently captures 92% market share of data center GPUs and grew revenue, earnings and free cash flow (“FCF”) an astounding 126%, 392%, and 610%, respectively, over the last year. While we expect competition to increase, we think NVDA can continue to maintain top market share. While many are concerned with backlog times shortening, we think the rollout of the B100, which promises 2.5x better performance for only 25% more cost, later this year will create more shortages. With leading edge technology, an increasing innovation cycle and strong cash generation, the company is well positioned for the increased adoption of artificial intelligence (AI).”
