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Nvidia’s Breakneck Rally Slows as Analyst Downgrades to Neutral

Nvidia Corp.’s (NVDA) astronomical gain since the start of last year has finally hit a plateau, with a recent downgrade from New Street Research analyst Pierre Ferragu contributing to the slowdown.

Ferragu’s Downgrade: Nvidia is "Getting Fully Valued"

Pierre Ferragu, New Street Research analyst, downgraded Nvidia’s stock to neutral from buy, citing the chipmaker’s 154% gain this year and almost 240% gain in 2023. Ferragu believes that Nvidia’s stock is "getting fully valued" after such a significant run-up.

Additional Upside Require New Catalysts

Additional upside for Nvidia’s stock will require significant new catalysts, such as a notable increase in the outlook beyond 2025, according to Ferragu. At present, he does not have conviction on this scenario playing out.

Valuation Concerns

Nvidia trades at more than 22 times estimated revenue for the next 12 months, making it the most expensive stock in the S&P 500 Index by this measure. New Street set a one-year price target of $135 for Nvidia, compared to its Friday close of $125.82. Analysts are concerned about Nvidia’s high valuation, which may limit its further growth.

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Complementary Stocks

New Street is positive on other AI-focused companies, such as Advanced Micro Devices Inc. (AMD) and Taiwan Semiconductor Manufacturing Co (TSM) Ltd., citing their growth trends and valuations. These companies, along with Broadcom Inc., Arista Networks Inc., and Micron Technology Inc., all "remain attractively valued," according to New Street.

Additional Analysis

AI legalese decoder can also help investors and analysts like Ferragu conduct more in-depth analysis of the data surrounding these companies. By analyzing sentiments, trends, and risks, the platform can provide valuable insights that may aid in making more informed investment decisions.

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