Here’s Why Investors Should Be Cautious About Nvidia Stock

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Here’s Why Investors Should Be Cautious About Nvidia Stock

InvestorPlace2023-12-05

While Nvidia (NASDAQ:NVDA) should continue to grow very quickly, the valuation of NVDA stock is high and the company is facing multiple, important threats. A collapse of cryptos and additional ...

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Strategy 1
·2023-12-05
Nothing new in this article. Why there are so many just rehashing and repeating what has been said already.
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Still, the company is facing at least two very tough challenges, and the valuation of NVDA stock is quite high.Given the latter two points, I believe that there’s a significant chance of the shares underperforming the Nasdaq and other AI plays in the medium term and the long term. As a result, I urge investors to trim NVDA stock to 5% or less of their portfolios.Promising Partnerships and Continued Rapid Growth on the HorizonOf course, Nvidia’s top and bottom lines are soaring as it benefits from robust demand for its AI chips. Moreover, in the future, the company’s multiple, impressive partnerships should provide the chip maker with additional positive catalysts.For example, Nvidia is partnering with Amazon (NASDAQ: AMZN) to “offer the first cloud AI supercomputer with NVIDIA Grace Hopper Superchip and AWS UltraCluster scalability” through Amazon’s cloud unit, AWS. And on the automotive front, Nvidia is collaborating with multiple major manufacturers, including BMW (OTC: BMWYY), Mercedes Benz, and the Taiwan-based giant, Foxconn.Speaking of automotive, I expect Nvidia’s auto-chip business to accelerate tremendously as many more vehicles adopt advanced driver assistance systems (ADAS), self-driving technology, and other high-tech offerings.In light of these points, I expect Nvidia’s overall growth to continue to be very strong for years.A High Valuation and Two Important ThreatsBased on many metrics, Nvidia’s valuation remains quite high. For example, its trailing price-sales ratio is a huge 26 times, while its enterprise value/EBITDA ratio is quite elevated at 50.Adding further to my caution about the stock’s valuation, research firm Morningstar recently set a “fair value estimate” of $480 on the name. That’s only a few percentage points above the shares’ current level.Further, Morningstar noted that NVDA expects its sales to China to fall meaningfully due to U.S. sanctions against the Asian country. Morningstar warned that additional American sanctions against China could hurt Nvidia.Additionally, with the U.S. government seemingly determined to crush cryptocurrencies sooner or later, I fear that such a development would meaningfully and negatively impact Nvidia’s top and bottom lines.According to one source, a change in the method of mining Ethereum (ETH-USD) contributed a great deal to a $1.5 billion decline in Nvidia’s revenue in Q3 of 2022.Therefore, if Washington largely destroys the crypto sector, I wouldn’t be surprised to see Nvidia’s gaming revenue sink by $1.5 billion per quarter or $6 billion per year. (Its gaming revenue in Q3 came in at $2.86 billion). That would lower its overall top line by about 8%, likely resulting in a sizeable decline of the shares.The Bottom Line on NVDA StockMorningstar wrote that it expects two of Nvidia’s competitors, AMD (NASDAQ: AMD) and Intel (NASDAQ: INTC), to also generate “tremendous revenue growth” in the future. I recommend that investors looking to capitalize on the AI chip boom consider diversifying their holdings by owning Intel and or AMD in addition to Nvidia, given the latter company’s high valuation and multiple threats.Those for whom NVDA shares already constitute 5% or less of their portfolios can hold their positions at their current levels, while the investors who don’t already own the name should consider buying it if it falls 10% or more.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":0},"commentList":[{"id":248852972835048,"gmtCreate":1701787063910,"gmtModify":1701787068403,"author":{"id":"4121555381154902","authorId":"4121555381154902","name":"Strategy 1","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"hat":"https://static.tigerbbs.com/50a4c8d97279fa9f8f1fa9749a6bdff4","crmLevel":7,"crmLevelSwitch":1},"htmlText":"Nothing new in this article. Why there are so many just rehashing and repeating what has been said already.&nbsp;","listText":"Nothing new in this article. Why there are so many just rehashing and repeating what has been said already.&nbsp;","text":"Nothing new in this article. Why there are so many just rehashing and repeating what has been said already.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/248852972835048","repostId":2388730868,"repostType":2,"repost":{"id":"2388730868","pubTimestamp":1701756959,"share":"https://www.laohu8.com/m/news/2388730868?lang=&edition=full","pubTime":"2023-12-05 14:15","market":"us","language":"en","title":"Here’s Why Investors Should Be Cautious About Nvidia Stock","url":"https://stock-news.laohu8.com/highlight/detail?id=2388730868","media":"InvestorPlace","summary":"While Nvidia (NVDA) should continue to grow very quickly, the valuation of NVDA stock is high and it is facing multiple, important threats.","content":"<html><head></head><body><ul style=\"\"><li><p>While <strong>Nvidia </strong>(NASDAQ:<strong><u>NVDA</u></strong>) should continue to grow very quickly, the valuation of NVDA stock is high and the company is facing multiple, important threats.  </p></li><li><p>A collapse of cryptos and additional sanctions against China could meaningfully hurt NVDA.</p></li><li><p>Investors should limit their holdings of NVDA stock.</p></li></ul><p><strong>Nvidia </strong>(NASDAQ: <strong><u>NVDA</u></strong>) has several very promising partnerships, and it should continue to grow rapidly, driven by the overall strength of its AI and auto businesses. Still, the company is facing at least two very tough challenges, and the valuation of NVDA stock is quite high.</p><p>Given the latter two points, I believe that there’s a significant chance of the shares underperforming the<strong> Nasdaq</strong> and other AI plays in the medium term and the long term. As a result, I urge investors to trim NVDA stock to 5% or less of their portfolios.</p><h2 id=\"id_1707733618\">Promising Partnerships and Continued Rapid Growth on the Horizon</h2><p>Of course, Nvidia’s top and bottom lines are soaring as it benefits from robust demand for its AI chips. Moreover, in the future, the company’s multiple, impressive partnerships should provide the chip maker with additional positive catalysts.</p><p>For example, Nvidia is partnering with <strong>Amazon </strong>(NASDAQ: <strong><u>AMZN</u></strong>) to “offer the first cloud AI supercomputer with NVIDIA Grace Hopper Superchip and AWS UltraCluster scalability” through Amazon’s cloud unit, AWS. And on the automotive front, Nvidia is collaborating with multiple major manufacturers, including <strong>BMW</strong> (OTC: <strong><u>BMWYY</u></strong>), <strong>Mercedes Benz</strong>, and the Taiwan-based giant,<strong> Foxconn</strong>.</p><p>Speaking of automotive, I expect Nvidia’s auto-chip business to accelerate tremendously as many more vehicles adopt advanced driver assistance systems (ADAS), self-driving technology, and other high-tech offerings.</p><p>In light of these points, I expect Nvidia’s overall growth to continue to be very strong for years.</p><h2 id=\"id_1748034416\">A High Valuation and Two Important Threats</h2><p>Based on many metrics, Nvidia’s valuation remains quite high. For example, its trailing price-sales ratio is a huge 26 times, while its enterprise value/EBITDA ratio is quite elevated at 50.</p><p>Adding further to my caution about the stock’s valuation, research firm <strong>Morningstar</strong> recently set a “fair value estimate” of $480 on the name. That’s only a few percentage points above the shares’ current level.</p><p>Further, Morningstar<strong> </strong>noted that NVDA expects its sales to China to fall meaningfully due to U.S. sanctions against the Asian country. Morningstar warned that additional American sanctions against China could hurt Nvidia.</p><p>Additionally, with the U.S. government seemingly determined to crush cryptocurrencies sooner or later, I fear that such a development would meaningfully and negatively impact Nvidia’s top and bottom lines.</p><p>According to one source, a change in the method of mining <strong>Ethereum</strong> (<strong><u>ETH-USD</u></strong>) contributed a great deal to a $1.5 billion decline in Nvidia’s revenue in Q3 of 2022.</p><p>Therefore, if Washington largely destroys the crypto sector, I wouldn’t be surprised to see Nvidia’s gaming revenue sink by $1.5 billion per quarter or $6 billion per year. (Its gaming revenue in Q3 came in at $2.86 billion). That would lower its overall top line by about 8%, likely resulting in a sizeable decline of the shares.</p><h2 id=\"id_380094518\">The Bottom Line on NVDA Stock</h2><p>Morningstar wrote that it expects two of Nvidia’s competitors, <strong>AMD</strong> (NASDAQ: <strong>AMD</strong>) and <strong>Intel </strong>(NASDAQ: <strong><u>INTC</u></strong>), to also generate “tremendous revenue growth” in the future. I recommend that investors looking to capitalize on the AI chip boom consider diversifying their holdings by owning Intel and or AMD in addition to Nvidia, given the latter company’s high valuation and multiple threats.</p><p>Those for whom NVDA shares already constitute 5% or less of their portfolios can hold their positions at their current levels, while the investors who don’t already own the name should consider buying it if it falls 10% or more.</p></body></html>","source":"investorplace_stock_picks","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Here’s Why Investors Should Be Cautious About Nvidia Stock</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nHere’s Why Investors Should Be Cautious About Nvidia Stock\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-12-05 14:15 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://investorplace.com/2023/12/heres-why-investors-should-be-cautious-about-nvidia-stock/><strong>InvestorPlace</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>While Nvidia (NASDAQ:NVDA) should continue to grow very quickly, the valuation of NVDA stock is high and the company is facing multiple, important threats.  A collapse of cryptos and additional ...</p>\n\n<a href=\"https://investorplace.com/2023/12/heres-why-investors-should-be-cautious-about-nvidia-stock/\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"IE00B7KXQ091.USD":"Janus Henderson Balanced A Inc USD","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","LU0943347566.SGD":"安联收益及增长平衡基金AM H2-SGD","BK4554":"元宇宙及AR概念","LU0109391861.USD":"富兰克林美国机遇基金A Acc","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","LU1988902786.USD":"FULLERTON LUX FUNDS GLOBAL ABSOLUTE ALPHA \"I\" (USD) ACC","IE00BJJMRX11.SGD":"Janus Henderson Balanced A Acc SGD","IE00BJTD4V19.USD":"NEUBERGER BERMAN US LONG SHORT EQUITY \"A1\" (USD) ACC","LU0079474960.USD":"联博美国增长基金A","IE00B1XK9C88.USD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A\" (USD) ACC","BK4548":"巴美列捷福持仓","LU0353189680.USD":"富国美国全盘成长基金Cl A Acc","LU0061474960.USD":"天利环球焦点基金AU Acc","IE00BMPRXR70.SGD":"Neuberger Berman 5G Connectivity A Acc SGD-H","BK4211":"区域性银行","LU0321505868.SGD":"Schroder ISF Global Dividend Maximiser A Dis SGD","LU0310799852.SGD":"FTIF - Templeton Global Equity Income A MDIS SGD","BK4220":"综合零售","BK4543":"AI","NVDA":"英伟达","IE00BJTD4N35.SGD":"Neuberger Berman US Long Short Equity A1  Acc SGD-H","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","BK4503":"景林资产持仓","LU0979878070.USD":"FULLERTON LUX FUNDS - ASIA ABSOLUTE ALPHA \"A\" (USD) ACC","BK4573":"虚拟现实","LU0316494557.USD":"FRANKLIN GLOBAL FUNDAMENTAL STRATEGIES \"A\" ACC","BK4581":"高盛持仓","IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","IE0034235188.USD":"PINEBRIDGE GLOBAL FOCUS EQUITY \"A\" (USD) ACC","LU0211327993.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (USD) ACC","BK4549":"软银资本持仓","LU0354030511.USD":"ALLSPRING  U.S. LARGE CAP GROWTH \"I\" (USD) ACC","LU0354030438.USD":"富国美国大盘成长基金Cl A Acc"},"source_url":"https://investorplace.com/2023/12/heres-why-investors-should-be-cautious-about-nvidia-stock/","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"2388730868","content_text":"While Nvidia (NASDAQ:NVDA) should continue to grow very quickly, the valuation of NVDA stock is high and the company is facing multiple, important threats.  A collapse of cryptos and additional sanctions against China could meaningfully hurt NVDA.Investors should limit their holdings of NVDA stock.Nvidia (NASDAQ: NVDA) has several very promising partnerships, and it should continue to grow rapidly, driven by the overall strength of its AI and auto businesses. Still, the company is facing at least two very tough challenges, and the valuation of NVDA stock is quite high.Given the latter two points, I believe that there’s a significant chance of the shares underperforming the Nasdaq and other AI plays in the medium term and the long term. As a result, I urge investors to trim NVDA stock to 5% or less of their portfolios.Promising Partnerships and Continued Rapid Growth on the HorizonOf course, Nvidia’s top and bottom lines are soaring as it benefits from robust demand for its AI chips. Moreover, in the future, the company’s multiple, impressive partnerships should provide the chip maker with additional positive catalysts.For example, Nvidia is partnering with Amazon (NASDAQ: AMZN) to “offer the first cloud AI supercomputer with NVIDIA Grace Hopper Superchip and AWS UltraCluster scalability” through Amazon’s cloud unit, AWS. And on the automotive front, Nvidia is collaborating with multiple major manufacturers, including BMW (OTC: BMWYY), Mercedes Benz, and the Taiwan-based giant, Foxconn.Speaking of automotive, I expect Nvidia’s auto-chip business to accelerate tremendously as many more vehicles adopt advanced driver assistance systems (ADAS), self-driving technology, and other high-tech offerings.In light of these points, I expect Nvidia’s overall growth to continue to be very strong for years.A High Valuation and Two Important ThreatsBased on many metrics, Nvidia’s valuation remains quite high. For example, its trailing price-sales ratio is a huge 26 times, while its enterprise value/EBITDA ratio is quite elevated at 50.Adding further to my caution about the stock’s valuation, research firm Morningstar recently set a “fair value estimate” of $480 on the name. That’s only a few percentage points above the shares’ current level.Further, Morningstar noted that NVDA expects its sales to China to fall meaningfully due to U.S. sanctions against the Asian country. Morningstar warned that additional American sanctions against China could hurt Nvidia.Additionally, with the U.S. government seemingly determined to crush cryptocurrencies sooner or later, I fear that such a development would meaningfully and negatively impact Nvidia’s top and bottom lines.According to one source, a change in the method of mining Ethereum (ETH-USD) contributed a great deal to a $1.5 billion decline in Nvidia’s revenue in Q3 of 2022.Therefore, if Washington largely destroys the crypto sector, I wouldn’t be surprised to see Nvidia’s gaming revenue sink by $1.5 billion per quarter or $6 billion per year. (Its gaming revenue in Q3 came in at $2.86 billion). That would lower its overall top line by about 8%, likely resulting in a sizeable decline of the shares.The Bottom Line on NVDA StockMorningstar wrote that it expects two of Nvidia’s competitors, AMD (NASDAQ: AMD) and Intel (NASDAQ: INTC), to also generate “tremendous revenue growth” in the future. I recommend that investors looking to capitalize on the AI chip boom consider diversifying their holdings by owning Intel and or AMD in addition to Nvidia, given the latter company’s high valuation and multiple threats.Those for whom NVDA shares already constitute 5% or less of their portfolios can hold their positions at their current levels, while the investors who don’t already own the name should consider buying it if it falls 10% or more.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":4,"commentSize":0,"repostSize":1,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}