Nvidia (NVDA +1.61%) stock has slipped in recent times along with many other stocks -- especially technology players -- as investors worried about the impact of President Donald Trump's tariffs on imports. Though electronics products are exempt for the moment, the president has said he will soon announce a specific level of tariffs for the tech industry.
So, tariffs do remain a risk for U.S. companies, though this doesn't change the long-term growth story for many well-established players -- such as Nvidia. The artificial intelligence (AI) boom continues, with companies continuing major investments to build out infrastructure, and as the chip leader, Nvidia stands to benefit.
That's why analysts overwhelmingly rate Nvidia a buy and the average forecast calls for Nvidia stock to climb almost 50% over the coming 12 months. Yet, this week, Seaport Global Securities stepped away from the crowd by initiating coverage of Nvidia with a sell rating and predicting the stock will fall slightly from its current level. Does Seaport know something the rest of Wall Street doesn't? Let's find out.
Image source: Getty Images.
Nvidia's story so far
First, a quick summary of the Nvidia story. This tech giant has built dominance in the area of AI chips, designing the world's most powerful graphics processing units (GPUs) to power crucial AI tasks. Such tasks include training and inferencing, the procedures that give large language models the capabilities to solve complex problems. Nvidia also has built a full portfolio of related products and services to accompany customers on their complete AI journey. So, Nvidia can help a customer build an AI platform and make use of it.
All of this has helped the tech powerhouse to generate double- and triple-digit revenue growth in recent years, reaching a record level of annual revenue -- $130 billion -- last year. And this is at a high level of profitability on sales as Nvidia has maintained gross margin higher than 70%.
Meanwhile, the current concerns about tariff impact across U.S. companies and industries has left Nvidia stock trading close to its lowest level in relation to forward earnings estimates in about a year. The stock today has a forward price-to-earnings ratio of 24.
On top of this, forecasts for a $2 trillion AI market by the early 2030s along with companies such as Alphabet saying they plan on investing billions to support AI development suggest this growth story is set to continue. So, it's not surprising Wall Street is optimistic about Nvidia's future and encourages investors to get in on the shares.
NASDAQ: NVDA
Key Data Points
Seaport's view on Nvidia
Now, let's consider Seaport's view. The firm set a $100 price target for the stock, implying a 7% decline from the April 30 closing price, and said Nvidia's AI prospects are priced in at the current level. The firm cited the complexity of deploying Nvidia's systems, customers' moves to develop their own chips, and the idea that customers may look closely at their AI spending in relation to potential use cases for the technology. Seaport doesn't see a bubble scenario here but does predict a slowdown in customers' AI budget growth.
So now let's get back to our question: Does Seaport know something the rest of Wall Street doesn't, and if so, could Nvidia be heading for declines? Seaport makes valid points, but Nvidia has indicated that it's in the AI business for the long haul. In fact, when speaking about the U.S. and China's work in AI at a tech conference this week, according to CNBC, Nvidia CEO Jensen Huang said, "Remember this is a long-term, infinite race."
It's very difficult to predict short-term trends during this long race. Nvidia could face hurdles at certain moments as it rolls out complex products, though its recent Blackwell launch so far has been successful. And Nvidia customers are developing their own chips but have spoken of the importance of ongoing work with Nvidia products too.
All of this means that, though it's possible Seaport is right about Nvidia's performance in the months to come, this doesn't necessarily change the long-term picture. And that's why, regardless of short-term movements, it's still a great idea to buy Nvidia now and hold on to this winning AI stock as the AI growth story enters its next chapters.
