Nvidia (NASDAQ:NVDA) stock recently took a breather, experiencing a 27% pullback from its all-time highs in June and reaching its lowest point on August 7. However, the AI chip titan has since rebounded, jumping 17%. Investors might now be eyeing this as a prime opportunity to jump back in before the next leg of the rally.
But not everyone is on board. Taking a bold stance against the prevailing bullish sentiment that has catapulted Nvidia into the ranks of the world’s most valuable companies, investor Oriental Trader thinks time is up for Nvidia. OT argues that the stock is “substantially overvalued at its current market cap” and believes it’s “probably just in the early stage of coming back to earth.”
So, what fuels this bearish perspective? Several factors come into play. OT draws a parallel to Intel’s struggles, suggesting that Nvidia might face similar challenges. While many believe Nvidia will enjoy a long period of limited competition, a similar argument was once made about Intel, only for a competitor to eventually catch up, leading Intel’s valuation to revert to levels more aligned with its profits and normal market demand.
Another bearish argument is that all these investments in AI will need to show results eventually, i.e., profits, and with the focus increasingly turning to the bottom-line, this might lead Nvidia’s customers to reduce demand or push for lower prices.
Furthermore, Warren Buffett’s recent sale of a huge portion of his Apple holdings in Q2 might signal bearish implications for the broader sector, even though he does not own Nvidia shares. Given Buffett’s influence in the investing world, his move could impact market sentiment.
At the same time, investors should not pin their hopes on the prospect of the Fed slashing interest rates to save the day. Based on previous cycles, OT says “Lower interest rates themselves do not guarantee stronger stock prices.”
Taking all this into account, OT rates NVDA shares a Strong Sell. (To watch Oriental Trader’s track record, click here)
However, OT’s take finds little support among Wall Street analysts. NVDA stock claims a Strong Buy consensus rating, based on a lopsided mix of 37 Buys and 4 Holds. Over the next year, the shares are expected to gain 24%, considering the average price target stands at $144.17. (See Nvidia stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
