Nvidia Corporation, commonly known as Nvidia, is a multinational technology company that specializes in the design and manufacture of graphics processing units (GPUs) for gaming and professional markets. Founded in 1993, Nvidia has since expanded its reach to artificial intelligence (AI), autonomous vehicles, and other emerging technologies. The company's stock has seen a remarkable rise over the past year, increasing by 154% in 2023 and an additional 240% in 2025. However, recent events have led to a rare downgrade of the company's stock.
In July 2024, New Street Research analyst Pierre Ferragu downgraded Nvidia from a 'buy' to a 'neutral' rating due to concerns over its valuation. The stock was valued at more than 35 times estimated revenue for the next 12 months, making it the most expensive stock in the S&P 500 Index by this measure. Ferragu expressed that there is a risk of derating if the current outlook remains unchanged.
Despite concerns over valuation, Ferragu acknowledged that Nvidia's franchise quality remains intact. However, he stated that there would need to be prolonged weakness for him to consider it a buying opportunity again. New Street set a one-year price target of $135 for Nvidia at the time, compared with its closing price of $125.82.
Despite the downgrade, Wall Street remains bullish on Nvidia, with 41 out of 54 analysts rating it a 'strong buy' and nine rating it a 'buy'. However, Seeking Alpha's quant system and analyst ratings both rated it as a 'hold'.
In addition to Nvidia, New Street also maintains positive outlooks on Advanced Micro Devices (AMD) and Taiwan Semiconductor Manufacturing Co (TSM) Ltd., citing their growth trends and valuations. Other stocks with AI exposure, such as Broadcom Inc., Arista Networks Inc., and Micron Technology Inc. are also considered attractively valued.
In conclusion, while Nvidia has experienced a rare downgrade due to concerns over its valuation, the company's franchise quality remains intact. The stock is still considered attractive by many analysts, and there may be opportunities for investors in the future should prolonged weakness occur.
