Nvidia's Future Clouded by Potential Rise of In-House AI Chips Amongst Its Biggest Customers

Nvidia, a leading force in the GPU market, might not be able to sustain its impressive growth streak, warns Gil Luria, an analyst at DA Davidson. While Nvidia's near-term prospects look promising with expected revenue surpassing $25 billion, Luria cautions that a dip in stock value could loom in the future.

Projected Challenges for Nvidia

According to Luria, Nvidia's main struggle will come from increased competition, notably from its primary customers. Companies such as Amazon, Meta, Microsoft, Alphabet, and Tesla are also major players in the burgeoning AI market and are reportedly developing their own AI chips. This move to self-reliance poses a significant risk to Nvidia's business model.

A Shift in the AI Market

As firms like Apple and Microsoft venture into creating proprietary AI chips, the demand for Nvidia's GPUs may drop, effectively softening their market dominance. Though presently, some clients are hoarding GPUs, Luria believes this trend will not last indefinitely, as there's a limit to how many chips these companies will need.

The Outlook for Nvidia's Stock

Despite a nearly two-fold stock increase within five months, fueled by the AI hype, Luria remains one of the few analysts expecting a downturn in Nvidia's stock. He predicts up to a 20% stock price retreat by the end of the year. The concern is that if revenue starts declining unexpectedly, the stock could experience a notable fall.

Nvidia, stock, AI