“We downgrade the stock to Neutral today, as upside will only materialize in a bull case, in which the outlook beyond 2025 increases materially, and we do not have the conviction on this scenario playing out yet,” said New Street analyst Pierre Ferragu in a report on Friday.
The firm values Nvidia at 35x, and set a 12-month price target of $135 on the AI GPU leader.
“The quality of the franchise is nevertheless intact, and we would be buyers again, but only on prolonged weakness,” Ferragu added.
Wall Street maintains a bullish take on Nvidia. Out of the 54 Wall Street analysts’ ratings made in the last 90 days on Seeking Alpha, 41 analysts rate it a Strong Buy, nine a Buy and only four Holds.
However, Seeking Alpha analysts and Seeking Alpha’s Quant system, which regularly beats the market, both rate it at Hold.
New Street maintains its Buy ratings on several other stocks exposed to AI infrastructure trends, including Advanced Micro Devices (AMD), Taiwan Semiconductor Manufacturing Company (TSM), Broadcom (AVGO) and Micron Technology (MU).
“For the first time since we called an inflection in spending for AI infrastructure in January 2023, we see expectations for AI semis aligned with capacity planning in the supply chain, aligned with the expansion of demand beyond hyperscalers, implying very strong capex revisions towards high-teens capex-to-sales ratios, and aligned with giga-cluster deployment plans,” Ferragu said.
“Although Nvidia remains the strongest franchise for AI datacenters, near-term expectations and valuation justify a more prudent view on the stock,” he added.