'Signs of trouble ahead,' investor says about Nvidia stock – TipRanks.com

who bet against nvidia (NASDAQ: NVDA) Has been proven wrong time and time again (and again) over the past few years. Since ChatGPT launched in November 2022, the AI ​​chipmaker has exceeded expectations quarter after quarter.

That being said, the past month has been a fairly volatile time for the nearly $3 trillion company, with shares falling nearly 5% after its most recent earnings call just weeks ago.

While no one is doubting NVDA's past performance, many investors are now questioning how long the company can sustain its remarkable year-over-year growth.

One investor, Daniel Schoenberger, believes that NVDA's perch among the top stock performers is becoming precarious.

“Not only are growth rates declining (which is not surprising, as these extremely high-growth rates are unsustainable), but gross margins are also declining,” the investor wrote.

Beyond the slowing rate, Schoenberger noted broader trends that don't bode well for the chipmaker.

“Nvidia is a cyclical business, and the past two years have been an exceptional opportunity for Nvidia (and one that will likely not be repeated in the near future),” wrote the investor, who added that “competition will increase and demand for companies will likely decrease (especially (The U.S. risks sliding into recession.)

For Schönberger, this is creating a mismatch between future earnings and current share prices. Nvidia is trading at 50x earnings and 57x free cash flow, which the investor believes is “too expensive.”

The investor added that this more cautious outlook could gain traction on Wall Street, noting that “analysts are turning on Nvidia and starting to lower expectations for the coming years.” Schoenberger believes it's worth a closer look, because “reduced expectations can go hand in hand with changes in sentiment.”

That's key for investors, as market sentiment could create a chain reaction that could make holding onto Nvidia a dangerous proposition. “Stocks driven by extreme emotion often overexaggerate in both directions – a bubble peak followed by a complete (and unfair) collapse in stock prices,” summarizes Investor.

Above all, worried about the risk of a “lost decade”, Schönberger calls NVDA shares a sell (To see Schönberger's track record, click here)

Still, while Schoenberger argues that analysts are cooling on Nvidia, the consensus remains a strong buy. 39 out of 42 analyst ratings are Buys, with only 3 Holds. Furthermore, NVDA's 12-month price target of $153.24 suggests a potential upside of ~29% from current levels. (See NVDA Stock Forecast)

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Disclaimer: The views 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.