“Time to take profits,” top investor says of Nvidia stock

Nvidia (NASDAQ:NVDA) riding a strong wave of positive momentum, with positive news from all directions. The AI ​​chip giant continues to dominate the data center market, and with their new Blackwell chipset already sold out for the coming year, Nvidia shows no signs of slowing down.

In addition, Nvidia’s upcoming inclusion in the Dow Jones Industrial Average this Friday is set to drive further gains as index-tracking funds will need to add NVDA stock to their portfolios, potentially lifting the stock even higher.

But for one top investor, known by the pseudonym The Value Portfolio, this latest development is a good opportunity to lock in some profits.

“Nvidia’s acquisition of DJI, which will force ETF purchases, potentially pushing the company back to all-time highs, is a good time to exit,” writes the 5-star investor, who sits in the top 1% of the Street’s stock. advantages.

Value Portfolio warns that NVDA’s current valuation does not match its growth prospects. Nvidia would need to maintain annual revenue growth of 55% over the next six years — a challenging feat for a company already valued at $3.4 trillion — to justify further stock price increases.

There are a few reasons for investor pessimism. First, AMD may start eroding NVDA’s market share. As evidence, Value Portfolio points to Meta, one of Nvidia’s biggest customers, which has recently started running open source models on AMD servers. For Value Portfolio, this shift suggests that Nvidia’s moat may not be as robust as previously thought, while highlighting AMD GPUs as a cost-effective alternative.

Another concern for the investor is that the vast majority of NVDA’s revenue comes from just a handful of customers, all of whom happen to be other mega-tech companies. This poses a danger to NVDA, as their clientele could very well be successful in developing some of these capabilities themselves.

“This competition from its biggest customers, who work directly with the end models, unlike Nvidia, could pose a massive threat to Nvidia’s margins,” the investor added.

To this end, The Value Portfolio has assigned a Strong Sell rating to NVDA stock, encouraging investors to take advantage of the current price bug. (To see The Value Portfolio’s track record, click here)

Value Portfolio’s view stands in stark contrast to the broader Wall Street sentiment. With 39 buy ratings and 3 holds, NVDA enjoys a consensus of Strong Buy. Its 12-month average price target of $153.86 suggests potential gains of 13% over the next year. (See NVDA stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.