Nvidia's Rally Will Run Out of Steam Next Year as the Chip Giant's Customers Turn Into Competitors, Analysts Say - Latest Global News

Nvidia’s Rally Will Run Out of Steam Next Year as the Chip Giant’s Customers Turn Into Competitors, Analysts Say

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  • Gil Luria says Nvidia’s monster rally won’t last as the chipmaker faces long-term challenges.

  • Analyst DA Davidson has predicted Nvidia shares will fall by up to 20% by the end of the year.

  • Nvidia’s biggest customers could become competition if they develop their own AI chips, Luria warned.

According to DA Davidson analyst Gil Luria, Nvidia stock can’t keep rising forever, and the chip giant will eventually suffer if demand for its GPUs weakens.

Luria told BNN Bloomberg on Tuesday that Nvidia is unlikely to see a significant decline in the near term. Profit in the final quarter will likely be “fantastic,” he said, predicting the company will report revenue of more than $25 billion.

However, the chipmaker’s long-term decline is inevitable as the company will face increased competition in the coming years, including from its own customers, he warned.

“The reason we’re not quite as optimistic as everyone else is because we’re looking at the horizon. What will happen next year? What will happen in 2026? We believe that evidence is accumulating that this cannot continue,” said Luria. “Whenever a company extracts so much profit from the market, competition comes, and in Nvidia’s case it comes from its customers. “

Most of Nvidia’s business comes from its five largest customers, which include Amazon, Meta, Microsoft, Alphabet and Tesla, according to Luria. These companies are also major competitors in the AI ​​competition, and companies like Apple and Microsoft are reportedly developing their own AI chips.

And while some Nvidia customers are keeping their GPUs in stock, demand will eventually run out, Luria previously told Bloomberg, because companies can only stockpile so many chips.

“Since our expectations are significantly below consensus expectations for the coming years, we expect that there will be a day when revenues start to decline, and if no one expects that, in which case the stock would suffer a significant decline .” Luria warned.

Nvidia has enjoyed a meteoric rally over the past 18 months, with shares nearly doubling in the last five months alone, as AI hype continues to grip Wall Street. That has led some analysts to become increasingly concerned about the company’s lofty valuation, which is now higher than other tech titans like Alphabet and Amazon.

Luria is one of the few forecasters who is bearish on Nvidia stock. He had previously called for the company’s shares to fall by up to 20% by the end of the year, saying the company was unlikely to maintain its rapid growth pace.

Read the original article on Business Insider

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