Seaport Global Securities analyst Jay Goldberg downgraded NVIDIA (NASDAQ: NVDA) three months ago. He put a “sell” on the stock and a price target of $100. The idea is not so wild because NVIDIA traded there on April 21. This was just four months ago.
Key Points
China Is A Challenge
An AI Tech Bubble
Take this quiz to see if you’re on track to retire. (sponsored)
NVIDIA will announce earnings this week. Even if the company reports disappointing earnings, the stock will not immediately reset to $100 from its current price of $177. However, there are two cases against NVIDIA’s current valuation. The first is that the global tech investment in AI will slow in 2016. The other is that NVIDIA will fail to gain sales in China. Both have a grain of truth in them already.
The first worry about AI slowing was addressed twice recently. After a rapid and costly buildup, Meta (NASDAQ: META) will end its hiring of world-class talent. The news was broadly covered, but originated in The Wall Street Journal. Meta has over 50 AI researchers and engineers. There are rumors that some of them were hired with a pay package of over $100 million. Meta chief Mark Zuckerberg has made it clear that the future success of his company relies on being one of the premier providers of AI in the world.
There is also worry that big tech is spending money on AI too fast. OpenAI CEO Sam Altman says that AI valuations are a bubble. Tech companies and financial firms are investing hundreds of billions in AI server farms. Altman compared recent tech firm valuations to the run-up in valuations before the crash of the Nasdaq between 2000 and 2002.
The second threat to NVIDIA’s stock price, according to Goldberg, is sales in China. Tariffs were going to make the process difficult. This meant NVIDIA would be locked out of the second-largest AI market in the world. When the tariffs were lifted, NVIDIA was permitted to sell its H20. This is much less powerful than NVIDIA’s flagship products.
NVIDIA has recently lobbied to sell China a more powerful product. However, the Commerce Secretary commented that the chips that China gets from US companies are far inferior to those it sells elsewhere in the world. He said, “We don’t sell them our best stuff, not our second-best stuff, not even our third-best.” After the comments were reported, the Chinese government strongly suggested that its tech companies not buy NVIDIA products at all.
Goldberg may be in a distinct minority, but that does not mean he is wrong.
“The Next NVIDIA” Could Change Your Life
If you missed out on NVIDIA’s historic run, your chance to see life-changing profits from AI isn’t over.
The 24/7 Wall Street Analyst who first called NVIDIA’s AI-fueled rise in 2009 just published a brand-new research report named “The Next NVIDIA.”
Download your FREE copy today.
The post This Analyst Thinks NVIDIA Will Fall 40% appeared first on 24/7 Wall St..
