Nvidia Faces Potential Growth Hurdles, Analyst Warns
Nvidia, the leading AI chip manufacturer, may encounter significant growth challenges by 2026, according to analyst Gil Luria of D.A. Davidson. Luria’s recent report raises concerns about the sustainability of Nvidia’s current growth trajectory and the potential risks of declining demand for its AI chips.
In a bear case scenario outlined by Luria, Nvidia could see a decline in revenue and earnings by 2026. This pessimistic outlook is based on the possibility of major hyperscalers like Microsoft and Amazon reducing their AI spending. Such a scenario could lead to a dramatic 48% drop in Nvidia’s stock price to $60 per share.
Luria points out several challenges facing Nvidia, including the need to maintain demand in China amid economic slowdowns and import restrictions. Additionally, smaller customers like CoreWeave require substantial capital to purchase Nvidia’s chips, potentially limiting market expansion. The analyst emphasizes that AI use cases must justify current investment levels to sustain growth.
Current market sentiment reflects some of these concerns, with Nvidia’s stock down 16% year-to-date. The volatility in stock movements suggests growing investor skepticism about the company’s prospects.
Despite these challenges, Nvidia continues to innovate. At its recent annual AI conference, the company introduced new chips, including the Vera Rubin, boasting improved performance. However, the key question remains whether these advancements can translate into sustained growth.
Luria maintains a “neutral” rating on Nvidia stock with a price target of $135. His bull case scenario sees a potential 38% increase to $160 per share if earnings expectations are met. The analyst’s price target reflects a balance between optimistic and pessimistic outlooks for the company.
As Nvidia navigates these potential hurdles, industry observers will be closely watching how the company addresses these challenges and maintains its position in the competitive AI chip market.
