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One analyst says Nvidia shares are too expensive, even considering its stellar second-quarter earnings.
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The chip maker posted record revenue of $13.5 billion, sending its shares jumping 7%.
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The company would need to grow its revenue by 20% over the next 25 years to justify its current price, according to David Trainer.
Nvidia’s stunning second-quarter earnings report seems to have everyone on Wall Street selling the limitless potential of the largest chip maker. Some even call Nvidia “The most important company of civilization.”
David Trainer, CEO of the research firm New Constructs, is not among them.
“Nvidia is the new Tesla of the stock market, the market blindly assigning a ridiculously high and unrealistic valuation,” Turner said in a statement Thursday. “We don’t deny that Nvidia is a great company, but we do point out that their assessment is beyond lofty and unwarranted.”
His comments follow the chipmaker’s second-quarter results, in which it said it posted a profit Record revenues of $13.51 billion during the past three-month period. The company said that’s 20% more than expected revenue of $11.22 billion, and a 101% increase over revenue recorded last year.
Meanwhile, Nvidia stock jumped as much as 7% to $506 a share in early trading Thursday. The stock pared its gains to about 3% shortly after the opening bell.
Turner said the latest quarter’s results are not enough to justify the billions Nvidia has earned in market value. Given its current price, the company would need to grow its revenues by about 20% annually over the next quarter century, a difficult prospect even in the face of growing demand for AI.
Moreover, Nvidia is likely to face more and more competition as time goes on, Trainer said. While Nvidia may seem like the top dog and the only game in town with the huge demand for its H100 GPUs, it probably won’t always be the only player in the space with the technology required to power the AI revolution.
“It makes absolutely no sense to buy Nvidia stock at its current valuation,” Turner said. “The ridiculous valuation Nvidia has achieved in such a short period of time reminds us that ‘fear of missing out’ is alive and well, this is a very dangerous phenomenon for investors and it never ends well.”
The company quickly became one of the leaders in the AI technology arms race, with investors raising its shares 229% year-to-date. Its success is reminiscent of Tesla’s in late 2021, when the electric vehicle maker’s share price soared to $407 a share. before dropping 65% and losing $700 billion in market value in 2022.
Other Wall Street commentators also grew critical Technology stocks have risen this yearas the “Magnificent Seven” giants led the bulk of the gains in the S&P 500 in the first half of 2023. The artificial intelligence craze in particular may be driving this. Small bubble in the stock marketAccording to Bank of America, which warns that the explosive rise in space has already begun Showing signs of fading.
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