"Bloomberg reports that 73 analysts have a Buy rating on the stock and another six rate it Hold. This optimism is astonishing for a stock that is up 1,426% in the past five years. The news service reports that the Nvidia bear, Jay Goldberg, a senior analyst at Seaport Global Securities, believes "There's a lot more that can go wrong with Nvidia than can go right.""
"Consider what has become known as "round-tripping" of cash. Nvidia invests in a company and then gets much of that investment back in chip sales. For example, Nvidia's $100 billion investment in OpenAI, the industry leader. Some of that money is "recycled" to Nvidia in chip sales, AKA revenue. One decision of the Financial Accounting Standards Board (FASB) or U.S. Securities and Exchange Commission (SEC) could stop this questionable practice. Nvidia's top line could take a massive hit."
"Another argument is that AI will never be a huge commercial success. The greatest technology advance in history may produce little money. Most AI users today rely on free versions. For AI to be considered a success, companies like Microsoft, Meta, and Amazon must make hundreds of billions of dollars on enterprise applications. It is much too early in AI's evolution to say whether that will happen."
Only one Wall Street analyst rates Nvidia as Sell while 73 rate it Buy and six rate it Hold. The stock rose 1,426% over the past five years. Senior analyst Jay Goldberg warns that much can go wrong for Nvidia because a few huge customers, including Microsoft and Amazon, account for a large share of revenue tied to AI infrastructure spending. Nvidia has engaged in investment "round-tripping," where investments are recycled into chip purchases, and an accounting or SEC decision could curtail that practice and reduce reported revenue. The commercial monetization of AI remains uncertain, and competitors like AMD are gaining ground.
Read at 24/7 Wall St.
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