Nvidia (NASDAQ:NVDA) has been on an impressive winning streak in recent years, dominating the AI chip market and holding a 90% share of the data center space. Demand for the company’s newest GPU, Blackwell, has been “extraordinary” and the chipset is already sold out for the next 12 months, CEO Jensen Huang said.
This explosive growth has pushed NVIDIA stock up 173% since the beginning of the year. But one investor, known by the pseudonym Brucie Research, sees potential risks looming.
“The uncertainty of future earnings raises significant red flags for NVIDIA,” Bluesea warned.
Bluesea believes that the wide disagreement between Nvidia bulls and bears regarding the company’s outlook is of great concern as it reflects two very different paths the company could take. Masu. The investor notes that analysts who have performed “very detailed analysis” have forecast a wide range of EPS for the fiscal year ending January 2027, from a high of $7.29 to a low of $1.81. This 4x difference is much higher than typical for tech giants.
“The increased uncertainty indicates that analysts are not confident that Nvidia will be able to maintain its current profit margins as competitive pressures increase in the coming years,” the investor argues.
According to Blue Sea, this squeeze on margins is foreseeable. For example, AMD could roll out competitive products at aggressive prices, Intel could beat Nvidia, and hyperscalers could move forward with developing their own AI chips.
All of this could cause a “significant correction” in Nvidia’s stock, whose expected price-earnings ratio after two fiscal years is 75% higher than Alphabet’s.
“The stock is very expensive, and the earnings upside may not be enough to support further bullish development,” concludes Brucie, who rates NVDA stock a Sell. (Click here to see Bluesea Research’s track record)
Brucie’s pessimism doesn’t seem to be reflected at all on Wall Street. NVDA has a consensus rating of Strong Buy with 39 Buy recommendations and 3 Holds. The company’s average 12-month price target is $153.86, implying approximately 14% upside from current levels. (See NVDA stock price prediction)
To find good ideas for trading stocks at attractive valuations, visit TipRanks’ Best Stocks to Buy, the tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured investor. Content is for informational purposes only. It is very important to perform your own analysis before making any investment.
