Nvidia downgraded due to valuation concerns, while AMD and TSMC are still favored in the United States
Nvidia was downgraded due to valuation concerns, with analysts lowering its rating to neutral. Nvidia's market value has increased by nearly $1.9 trillion, but its valuation is at its highest, with uncertain future prospects. In addition, analysts are optimistic about the growth trends and valuations of AMD and Taiwan Semiconductor
According to the Zhītōng Finance and Economics APP, Pierre Ferragu, an analyst at New Street Research, stated that NVIDIA (NVDA.US) has been rapidly rising since the beginning of last year and has now exhausted its further upside potential, downgrading the stock from buy to neutral.
Ferragu wrote that the additional upside potential "will only materialize in a bull market, and the prospects beyond 2025 will significantly increase the likelihood, but it is still uncertain whether this will happen."
He added that while "the quality of the franchise remains intact," NVIDIA faces the risk of a downgrade if the current outlook remains unchanged.
NVIDIA rose nearly 240% in 2023 and surged 154% this year, making it the second best-performing company among the S&P 500 index components this year, second only to Super Micro Computer (SMCI.US), which is also a favorite among artificial intelligence investors. The hot trend has increased NVIDIA's market value by nearly $1.9 trillion, briefly making it the world's largest market cap company.
For a company that has become the biggest beneficiary of the artificial intelligence spending boom, an analyst downgrade is relatively rare. Bloomberg tracks that nearly 90% of analysts recommend buying the stock. However, valuation is often seen as a concerning issue.
NVIDIA's forward price-to-earnings ratio for the next 12 months exceeds 22 times, making the chipmaker the most highly valued stock among the S&P 500 index components by this measure.
New Street has set a one-year target price of $135 for NVIDIA, while the stock closed at $125.82 last Friday.
It is worth mentioning that besides NVIDIA, New Street is optimistic about the growth trends and valuations of American Super Micro (AMD.US) and Taiwan Semiconductor (TSM.US).
In a report, New Street stated that American Super Micro and Taiwan Semiconductor are "the most worthwhile stocks in the group, providing strong upside potential in both our base and high scenarios," and added that among other artificial intelligence concept stocks, Broadcom (AVGO.US), Arista Networks (ANET.US), and Micron Technology (MU.US) are "still attractive."