Why one analyst and Nvidia skeptic says the chipmaker might not grow at all next year

Why one analyst and Nvidia skeptic says the chipmaker might not grow at all next year

  • 19.03.2025 02:33
  • businessinsider.com
  • Keywords: AI, GPU

Analyst Gil Luria predicts Nvidia may not grow in 2026 if GPU demand weakens, citing risks like China's economic slowdown and smaller customers struggling to buy chips. He warns of a potential 48% stock decline in his bear case, while his bull case expects moderate growth.

Nvidia NewsNVDAsentiment_dissatisfiedMSFTsentiment_neutralAMZNsentiment_neutral
open_in_newOriginal article

Estimated market influence

Nvidia

Nvidia

Negativesentiment_dissatisfied
Analyst rating: Strong buy

Analyst predicts potential decline in growth and stock price.

Microsoft

Microsoft

Neutralsentiment_neutral
Analyst rating: Strong buy

Potential impact on Nvidia's customer base if they reduce spending.

Amazon

Amazon

Neutralsentiment_neutral
Analyst rating: Strong buy

Same as Microsoft, potential reduction in demand for Nvidia's chips.

CoreWeave

Negativesentiment_dissatisfied
Analyst rating: N/A

Smaller customers struggling to raise capital may reduce chip purchases.

Context

Analysis of Nvidia Stock Prediction: Business Insights and Market Implications

Key Facts and Data Points:

  • Analyst Outlook: Gil Luria, head of technology research at DA Davidson, predicts that Nvidia may not grow in 2026 if GPU demand wanes.
  • Bear Case Scenario:
    • Revenue and earnings could decline in 2026 due to hyperscalers (largest customers) reducing spending.
    • Stock price could drop to $60, implying a 48% decline from current levels.
  • Current Valuation:
    • Luria maintains a "neutral" rating with a $135 price target, suggesting 16% upside potential.
  • Stock Performance:
    • Nvidia stock is down 16% year-to-date (YTD) as of March 2025.
  • Investor Sentiment:
    • Investors are growing skeptical of Nvidia's growth trajectory despite its leading products.

Market Trends and Business Impact:

  • GPU Demand Risks: The article highlights the potential leveling off of GPU demand, which could significantly impact Nvidia's revenue growth.
  • Dependency on Hyperscalers: Nvidia's largest customers (hyperscalers like Microsoft and Amazon) are critical to its growth. Any pullback in spending could hurt the company's performance.
  • Geopolitical Risks: Demand for Nvidia's chips in China is at risk due to economic slowdowns and U.S. import restrictions on high-tech products.
  • Smaller Customers' Challenges: Smaller customers, such as CoreWeave, face capital constraints, potentially limiting their ability to purchase Nvidia's chips.

Competitive Dynamics:

  • Technological Advancements: Nvidia showcased new chip developments (e.g., Vera Rubin) at its annual event, maintaining its competitive edge.
  • Investor Expectations: Despite technological leadership, investors are demanding clearer evidence of sustained growth at current rates.

Strategic Considerations:

  • AI Use Cases: The success of AI applications will be crucial for justifying continued high investments in Nvidia's products.
  • Growth Trajectory: After years of spectacular growth, Nvidia faces the challenge of maintaining its momentum, which may become increasingly difficult given investor skepticism.

Long-Term Effects and Regulatory Impacts:

  • While not explicitly detailed, geopolitical tensions and regulatory risks (e.g., import restrictions) could have long-term implications for Nvidia's global operations and revenue streams.

Conclusion:

Nvidia's future growth hinges on several critical factors, including GPU demand, hyperscaler spending, and the success of AI applications. While the company maintains a technological lead, investor skepticism and potential market saturation pose significant risks to its stock performance in the near term.