US Stock Market – Nvidia stock has been downgraded was primarily due to valuation concerns, as the research firm believes the stock’s current price reflects the company’s expected growth in the near future. While Nvidia has experienced significant growth, particularly driven by the increasing demand for AI technology, analysts at New Street Research suggest that there is limited potential for further upside in the stock’s value unless the company’s outlook beyond 2025 improves significantly.
Nvidia stock has experienced significant growth over the past year, largely driven by the increasing demand for AI technology. However, the stock was downgraded by New Street Research from a ‘buy’ to a ‘neutral’ rating due to valuation concerns.
The Nvidia stock price rise 154 percent this year over a gain of 240 percent in the previous year 2023. The share price fell −1.91% as on last Friday.
Nvidia Stock Downgraded – Unexpected?
The downgrade by New Street Research might be considered unexpected due to Nvidia’s recent strong performance and the overall positive sentiment surrounding AI technology. However, the research firm’s message is clear:
Valuation Concerns: New Street Research believes that Nvidia’s stock is currently “fully valued.” This means that the current stock price already reflects the company’s expected growth and future earnings potential based on current information. Therefore, there’s limited room for further price appreciation unless new catalysts emerge.
Limited Upside Potential: Analysts at the firm see limited upside potential for the stock in the near term. While Nvidia’s growth trajectory has been impressive, they believe that the market has already priced in this growth.
Focus on Long-Term Outlook: The downgrade does not necessarily mean that New Street Research is bearish on Nvidia’s long-term prospects. Rather, it suggests that investors should temper their short-term expectations. The firm indicates that a significant increase in the stock price would require a more bullish outlook beyond 2025, which they don’t have enough conviction in yet.
Industry Insights: The downgrade also reflects New Street Research’s insights gathered from the industry value chain. This suggests that their assessment is not solely based on financial models but also on discussions with industry players and an understanding of the broader competitive landscape.
Overall, the downgrade is a cautionary note to investors. While Nvidia’s performance has been exceptional, the current stock price might already reflect this success. Significant further gains would likely require stronger evidence of continued growth beyond the current expectations.