Nvidia Enjoyed AI Hype, But Now It's Approaching 'Trough Of Disillusion': Analyst

Shares of Nvidia Corp (NASDAQ: NVDA) slipped in early trading on Wednesday, Jan. 3.

Although the company is a leader in accelerated computing and is likely to generate “impressive 20% CAGR off of 2022 levels across cycles,” the out-year consensus expectations appear too high, according to DA Davidson.

The Nvidia Analyst: Gil Luria initiated coverage of Nvidia with a Neutral rating and price target of $410.

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The Nvidia Thesis: While AI is the most significantly transformative technology since the Internet, the level of investments in its development in 2023 is unlikely to continue to be as elevated beyond 2024, Luria said in the initiation note.

Nvidia has exposure to the AI hype, which is approaching the “trough of disillusion,” the analyst stated.

“While our CY24 estimates have customers filling in their GenAI capacity, our CY25 estimates are Street low as we expect the big dropoff to happen in this timeframe,” Luria wrote. “Therefore, we see NVDA as a sum of a core accelerated computing business growing sustainably 20% off of 2022 levels and a “GenAI sandbox” company that is unlikely to sustain current levels,” he added.

NVDA Price Action: Shares of Nvidia had declined by 0.9% to $477.42 at the time of publication on Wednesday.

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