When you've been on a run like Nvidia (NASDAQ: NVDA) has over the past few years, it's almost always because investors see massive growth ahead. For a company positioned as the picks-and-shovels play for the entire artificial intelligence (AI) industry, many still think the sky is the limit for the AI chip king.
However, one Wall Street analyst thinks that may no longer be the case and is downgrading Nvidia from a buy rating to a hold with no price target listed.
While Summit Insights analyst Kinngai Chan expects Nvidia to keep beating consensus estimates in future earnings reports, especially after strong fiscal 2025 fourth-quarter results, he's concerned "NVDA's outperformance and growth could decelerate into 2HFY26 as supply of NVDA's GPUs catches up to industry demand."
Chan also pointed out a larger contraction in margins than expected due to the company increasing production of its next-generation Blackwell chips. The emergence of DeepSeek, a powerful AI chatbot that was supposedly built at a fraction of the cost of popular names like ChatGPT also seems to be on Chan's mind. He noted that more efficient AI training and the ability to develop AI programs with less advanced computing will adversely impact Nvidia on a medium- to long-term basis.
Chan makes some good points here. While industry leaders usually find ways to adapt to new challenges, there is still a lot investors don't know about AI and its potential obstacles. There could be near-term risks from the Trump administration potentially following through with more intense export controls on chips, so caution is warranted with Nvidia, as well as with other large AI stocks that have seen their valuations soar.
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $765,576!*
Now, it’s worth noting Stock Advisor’s total average return is 890% — a market-crushing outperformance compared to 173% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.
*Stock Advisor returns as of February 24, 2025
Story Continues
