(Bloomberg) — Nvidia Corp.’s dizzying recovery (NVDA) since the beginning of last year has finally run out of room to rise, at least for now.
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That’s according to New Street Research analyst Pierre Ferragu, who downgraded the AI-focused chipmaker from buy to neutral, saying shares are “fully valued” after soaring 156% this year, in addition to a gain of nearly 240% in 2023. Shares fell as much as 2% on Friday, compared with a nearly 1% gain for the Nasdaq 100 index.
The additional advantage “will only materialize in a bullish scenario, in which prospects beyond 2025 increase materially, and we still do not have conviction about this ongoing scenario”, said Ferragu.
Although the “quality of the franchise is intact”, there is, “at the very least, a risk of disqualification” if the current outlook remains unchanged, he added.
The downgrade is rare for a company that has become the biggest beneficiary of the artificial intelligence spending boom. Almost 90% of analysts monitored by Bloomberg recommend buying the shares.
Nvidia trades at nearly 23 times estimated revenue for the next 12 months, making it the most expensive stock in the S&P 500 index by this measure. It’s the second-best performer among S&P 500 constituents this year, behind Super Micro Computer Inc, another favorite among AI investors. The rise added $1.9 trillion to Nvidia’s market capitalization and briefly resulted in it earning the title of largest company in the world.
New Street set a one-year price target of $135 for Nvidia, compared to its most recent close of $128.28.
In addition to Nvidia, New Street is positive on both Advanced Micro Devices Inc. and Taiwan Semiconductor Manufacturing Co Ltd., citing their growth trends and valuations.
AMD and TSMC are “the best names to own in the group, offering strong upside in both our base and upside scenarios,” New Street said in a note, adding that among other stocks with AI exposure, Broadcom Inc., Arista Networks Inc. ., and Micron Technology Inc. “remain attractively valued.”
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