Nvidia May Be Slowing Down as UBS Analyst Warns of Huge 'Risk of Slowing Capex Growth'
UBS analyst Mark Haefele warns of a rising risk in slowing capital expenditure growth for hyperscalers, citing shareholder pressure to justify spending. This shift reflects Nvidia's waning monopoly as tech giants diversify suppliers with in-house and competitor chips. Despite this, demand remains strong, evidenced by Firmus securing an eight-year deal for up to 170,000 Nvidia GPUs. Analyst consensus remains 'Strong Buy' with a $309.33 price target.
Nvidia stock (NVDA) saw a small increase early Tuesday, rising 1.5% to $197.96. Even with this morning rise, there was a word of caution issued by Mark Haefele. The chief investment officer at UBS Global Wealth Management pointed out these market troubles. He wrote that "the hyperscalers' share price decline this month points to increasing shareholder pressure to justify their spending, and we acknowledge that the risk of slowing capex growth has risen at the margin."
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High conviction NVDA bears now have this Tradr ETFThis shift shows that Nvidia's early hold on advanced chip sales is fading as global business spending moves to other choices, which are sometimes cheaper).
Big Tech Spread Out their Chip Orders
When the artificial intelligence boom started, Nvidia was essentially the only company making the high-powered graphics chips needed to run complex software. Because of this monopoly, tech giants had to spend all their hardware budgets at Nvidia.
Now, that dynamic is shifting. Large tech buyers are spreading their money around to avoid relying on just one supplier. Recent stock drops for these large cloud companies show that investors want proof of why they are spending so much money, which makes a slowdown in tech spending much more likely.
At first, Nvidia only had to worry about its main rival, Advanced Micro Devices (AMD), making similar chips. Now, the market is much more crowded. Major cloud companies are designing their own tailored chips in-house, and traditional processor makers like Intel (INTC) are building competing products. Nvidia is seeing its absolute control over chip orders get chopped up by these new options.
Nvidia Builds Vera Rubin Hardware
To win back its undisputed top spot, Nvidia is banking on its upcoming product line, which is codenamed Vera Rubin. The strategy here relies on pure technological power.
Nvidia wants to make these next-generation chips so fast and efficient that they leave every competitor far behind. If Nvidia can create a large enough performance gap, tech companies will feel forced to buy Nvidia hardware again because choosing an alternative would mean falling behind in the tech race.
Firmus Secures Nvidia Partnership
Despite the growing pressure on tech spending, real-world demand for graphics chips stays strong. An Australian company called Firmus signed an eight-year deal with Nvidia to build a 360-megawatt AI data center in Indonesia.
This deal involves buying up to 170,000 Nvidia graphics chips through 2028. Nvidia previously put money into Firmus during a $505 million funding round alongside an investment firm named Coatue. Through this deal, Nvidia will make money from direct chip sales and take a share of the cloud profits from the new facility.
Is Nvidia a Buy, Hold, or Sell?
Nvidia's stock (NVDA) continues to carry a Strong Buy consensus, based on 37 analyst ratings over the past three months. Out of those, 36 call it a Buy and one recommends a Hold. The average 12-month NVDA price target sits at $309.33, which represents 56.17% upside potential. (See the NVDA stock forecast)
