Key Points
- An analyst reiterated a “Sell” rating on Nvidia stock with a $140 price target, citing multiple headwinds.
- Nvidia’s $26 billion in cloud deals may be “rebates” that hide the company’s true profitability.
- Rising competition from Google’s custom TPU chips poses a significant threat to Nvidia’s market dominance.
- The company is making massive financial commitments to its own customers, creating substantial risk.
An analyst at Seaport Research Partners is sounding the alarm on Nvidia, warning that the chipmaking giant faces serious competitive and financial challenges. On Monday, analyst Jay Goldberg maintained his “Sell” rating and a $140 price target on the company’s stock, arguing that troubling signs are mounting.
Goldberg’s main concern is that Nvidia is relying on complex financial arrangements that aren’t fully transparent to investors but could significantly impact its bottom line. One major red flag is the company’s $26 billion in cloud compute service agreements. While Nvidia claims these are for research, Goldberg describes them as “a form of rebate” that, if properly accounted for, could slash the company’s profit margins.
Competition is also heating up. Goldberg highlighted Google’s growing success in promoting its own internally designed TPU chips. He noted that while these chips “are not for everyone,” they “can outperform Nvidia systems on many metrics,” posing a real threat as the AI market diversifies.
A third major issue is Nvidia’s growing habit of bankrolling its own customers. The company has already invested $6 billion in private companies this year and has committed another $17 billion. Goldberg warns that a potential, unsigned agreement with OpenAI “could add another $100 billion to the list,” creating a massive financial risk for Nvidia.
Finally, the analyst pointed to a sharp increase in Nvidia’s working capital. The company says this reflects strong demand, but Goldberg suggests it could also signal that Nvidia is financially propping up its manufacturing partners. He argues these combined headwinds could weigh heavily on the company’s performance into next year.
