- Nvidia Corporation’s stock has surged 31.32% driven by optimism around the Blackwell GPU, but I believe this enthusiasm is overly optimistic and exposes valuation risks.
- The Blackwell GPU faces overheating issues in server configurations, complicating its adoption and potentially increasing costs for hyperscalers, which could impact Nvidia’s sales.
- Despite upward revisions for Q3 earnings, Nvidia’s high valuation and reliance on Blackwell’s success make its current stock price unsustainable, warranting a strong sell recommendation.
- Hyperscalers’ existing investments in older Nvidia chips and potential for achieving AGI with current hardware reduce the urgency for Blackwell adoption, posing further risks to Nvidia’s growth.
Investment Thesis
Nvidia Corporation (NASDAQ:NVDA) shares are up 31.32% since my last update on the AI chip giant in September. Nvidia’s powerful gains (while I think are unwarranted) have been driven by continued investor optimism surrounding the expected performance of their Blackwell GPUs.
The Blackwell GPU has sparked strong market excitement that these new chips could be Nvidia’s new super product that accelerates the company to the next leg of growth, as the California company continues to dominate the AI GPU industry (for now).
While their dominance is undeniable, I’m still bearish. The investor expectations surrounding Blackwell’s are still overly optimistic, which means shares are exposed from a valuation standpoint.
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