New Street Research analyst Pierre Ferragu downgraded Nvidia from a Buy to a Neutral rating.
According to the Zhixun Finance app, Pierre Ferragu, an analyst at New Street Research, said that Nvidia (NVDA.US) has risen sharply since early last year and has now finally exhausted its potential for further growth, downgrading the stock from Buy to Neutral.
Ferragu wrote that the additional upside was "only likely to be realized in a bull market, and that prospects for increase will greatly increase after 2025, but it is currently uncertain whether this will happen."
He added that while the quality of the franchise remains intact, Nvidia faces the risk of a downgrade if current prospects persist.
Nvidia rose nearly 240% in 2023 and soared 154% this year, making it the second-best performer among the components of the S&P 500 Index this year, behind only Super Micro Computer (SMCI.US), which is also a favorite of artificial intelligence investors. The hot trend has boosted Nvidia's market cap by nearly $1.9 trillion and briefly made it the world's largest company by market value.
For a company that has become the biggest beneficiary of the AI spending boom, a rating downgrade by an analyst is rare. Nearly 90% of analysts tracked by Bloomberg recommend buying the stock. However, valuation is often seen as a troubling issue.
Nvidia's P/E ratio for expected revenues in the next 12 months exceeded 22 times, making the chipmaker the most highly valued stock among the S&P 500 Index components on that measure.
New Street's one-year target price for Nvidia is $135, while the stock's closing price last Friday was $125.82.
It is worth mentioning that aside from Nvidia, New Street is also bullish on the growth trends and valuations of Advanced Micro Devices (AMD.US) and Taiwan Semiconductor (TSM.US).
In a report, New Street said that Advanced Micro Devices and Taiwan Semiconductor are "the most worthwhile stocks in the group, providing strong upside potential in our base and high scenarios," and added that among other AI concept stocks, Broadcom (AVGO.US), Arista Networks (ANET.US), and Micron Technology (MU.US) are all "still attractive."