Nvidia Gets Downgrade On Valuation Concerns After Rally

Nvidia Corp.’s significant rally since the start of last year may have reached its limit, according to New Street Research analyst Pierre Ferragu, Ryan Vlastelica reported for Bloomberg News.

Nvidia remains the second-best performer among S&P 500 components this year. I Photo: NVIDIA Asia Pacific Facebook

Ferragu downgraded Nvidia to neutral from buy, stating that the stock is "getting fully valued" after soaring 154% this year, following a nearly 240% gain in 2023. Shares fell 1.9% on Friday, while the Nasdaq 100 Index gained 1%.

Ferragu noted that additional upside for Nvidia would only materialize under a bullish scenario, which he is not confident will play out.

Despite the intact quality of Nvidia’s franchise, Ferragu warned of a potential "risk of derating" if the current outlook remains unchanged.

Nvidia remains the second-best performer among S&P 500 components this year, trailing only Super Micro Computer Inc (SMCI), another AI investor favorite.

The climb has added almost $1.9 trillion to Nvidia’s market capitalization, briefly making it the world's largest company. Despite the downgrade, nearly 90% of analysts tracked by Bloomberg still recommend buying the stock.