Nvidia Corporation (NASDAQ:NVDA) recently received a rare downgrade from New Street Research. Analyst Pierre Ferragu downgraded the stock from “buy” to “neutral,” citing concerns about its overvaluation. The stock had seen a significant 161% year-to-date surge, with a previous gain of nearly 240% in 2023. Ferragu expressed doubts about further increases in the stock and warned of a possible rating downgrade if the current outlook remains unchanged.
Despite the surge in AI-related investments, Ferragu noted a normalization in demand for Nvidia’s AI-oriented GPUs, stating that customer demand was in line with expectations. Despite the downgrade, Nvidia remains the second-best performer among S&P 500 components this year.
The recent stock market surge, driven by artificial intelligence optimism, has drawn comparisons to the dot-com bubble. Concerns about overvaluation arise as a small group of tech giants, including Nvidia, dominate the market. Despite the downgrade, New Street Research has a positive view on Advanced Micro Devices Inc. (NASDAQ:AMD) and Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSMC), citing growth trends and valuations.
Nvidia’s CEO, Jensen Huang, has been selling shares of the company amid the stock surge, offloading more than $29 million worth of stock. This surge has pushed Nvidia’s market value past $3 trillion, showcasing its dominant position in the tech industry.
New Street Research emphasizes that AMD and TSMC are the best names to own in the group, offering strong upside potential. Other stocks with AI exposure, including Broadcom Inc. (NASDAQ: AVGO), Arista Networks Inc. (NYSE: ANET), and Micron Technology Inc. (NASDAQ: MU), are also seen to have attractive valuations.
Goldman Sachs and Citi predict that SK Hynix, Nvidia’s top supplier, will continue to drive AI demand. The content was partially produced with the help of artificial intelligence tools and reviewed by Benzinga editors. Photo courtesy of Shutterstock.
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