“Nvidia Stock Rally Comes to a Halt as Analyst Downgrades Rating”
Nvidia Corp. has been on a remarkable uptrend rally since the beginning of last year, but it seems that the momentum has finally slowed down. According to Pierre Ferragu, an analyst at New Street Research, the chipmaking giant’s stock has reached its peak and is now fully valued.
Ferragu downgraded Nvidia’s stock to a neutral rating from a buy rating, citing concerns about the stock being fully valued. Despite a surge of 154 per cent this year and 240 per cent in the previous year, Nvidia’s shares fell 1.9 per cent in Friday’s trading session.
The analyst also mentioned that the franchise’s quality is still intact, but there is a risk of derating if the current outlook remains unchanged. This comes as a surprise, as Nvidia has been one of the top performers in the S&P 500 this year, adding $1.9 trillion to its market value and briefly becoming the world’s largest company.
Analysts rarely downgrade a stock like Nvidia, which is a key player in the artificial intelligence boom. Despite concerns about valuations, 90 per cent of analysts still have a buy rating on the stock. Nvidia’s stock trades at more than 22 times the estimated revenue for the next year, making it the most expensive stock in the S&P 500 Index.
In contrast, New Street Research is positive on stocks like Advanced Micro Devices Inc. (AMD) and Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), citing good valuation and growth trends. They set a one-year target price on Nvidia Corp. at $135, compared to $125.82 after Friday’s close.
Overall, while Nvidia’s stock rally may have come to a halt, there are still opportunities in the semiconductor industry with stocks like AMD and TSMC offering strong upsides. Investors will be keeping a close eye on how Nvidia navigates this new phase in its stock performance.
