It seemed inevitable that Nvidia (NVDA 2.17%) stock wouldn't keep up its torrid pace after more than tripling over the last year. The stock has finally begun to give back a small slice of those gains in recent weeks.
That downturn extended today after Barron's highlighted an analyst report that threw cold water on many investors' growth predictions for Nvidia's artificial intelligence (AI) computer chip sales. Shares dropped nearly 5% and were still down by 2.8% as of 1:30 p.m. ET.
NASDAQ: NVDA
Key Data Points
Artificial intelligence (AI) dominance ending
Nvidia has been dominant in the supply of hardware and even software for the high-powered computing needs generated by the onset of so many AI applications. Megacap technology companies including Microsoft, Meta Platforms, and even Tesla have been at the front of a long line of buyers.
But D.A. Davidson analyst Gil Luria thinks that's exactly why Nvidia shares will be heading lower. In a recent report, Luria explains that those big technology companies will soon be shifting spending to grow the production of in-house AI-related hardware. Luria believes that will lead to a "significant cyclical downturn by 2026" for Nvidia.
That thinking has D.A. Davidson expecting Nvidia shares to drop to $620 per share. That would represent a decline of nearly 30% from Monday's closing price. But investors should take that prediction in a larger context, too. Nvidia isn't just an AI chip company. And it could grow revenue in the coming years from its other segments, including autonomous driving technologies.
Nvidia's stock run certainly has been far and fast. Yet even with that price target prediction, Luria has kept a "hold" rating on the shares. For long-term investors, that's probably the prudent thing to do. A continued decline in the shares could even provide a good opportunity to own more.
