Why That One Nvidia Downgrade is Silly

Few analysts would dare to issue a negative rating on Nvidia (NVDA). New Street Research, a London-based investment firm, issued a rare downgrade. It said that NVDA stock is fully valued.

Valuation metrics measure the market’s ever-changing beauty contest scores. With strong demand for Nvidia’s top-end Blackwell AI server chips and its low-end H100 ones, its growth will continue.

The analyst issued a bull case that cited material growth in 2025. However, analyst Pierre Ferragu was skeptical that the scenario would play out.

Last week, investors bought Advanced Micro Devices (AMD) on the misguided view that the stock traded at a discount compared to Nvidia. AMD stock, however, ended last week at a P/E of over 250 times. Furthermore, AMD continued to struggle to catch up to Nvidia. Nvidia’s proprietary CUDA architecture effectively hurts AMD’s entry into the AI server market.

Nvidia dominates in the PC market. Its CEO skillfully managed the flood of GPU supplies after cryptocurrency mining ended. In 2022, Ethereum completed the merge which ended mining. Fortunately, consumer demand for warn-out GPUs used for mining was weak. This allowed Nvidia to raise its mid-range GPU in the $500 – $600 range. The RTX 4080 Super is around $975 and will not likely fall.

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