New Street Research Downgrades Nvidia Stock to Neutral - What Does This Mean for Investors?
In a recent note released on Friday, New Street Research analysts have downgraded Nvidia (NASDAQ:) stock to Neutral from Buy. This news has caused the AI chipmaker's shares to fall slightly ahead of the market open.
According to the independent research firm, consensus expectations suggest that GPU revenues will increase by 35% in 2025, aligning with their previous forecast. However, they see limited further upside based on feedback from the value chain. As a result, they have downgraded the stock to Neutral, citing the need for a more bullish outlook beyond 2025 to see any significant upside potential.
New Street Research also highlighted potential risks to revenue growth, such as a slowdown in hyperscale capital expenditures and increased competition from ASICs and AMD (NASDAQ:). If the current outlook remains unchanged, analysts do not anticipate any further upside in the stock and warn of a potential derating.
The firm values Nvidia at 35x earnings, with a target price of $135 for the next year, indicating only a 5% upside from current levels. While they acknowledge the quality of Nvidia's franchise, they suggest only buying on extended weakness.
In conclusion, the downgrade of Nvidia stock to Neutral by New Street Research suggests that investors may want to exercise caution. With limited upside potential in the near term and potential risks to revenue growth, it may be wise to reevaluate your investment in Nvidia.