- Seaport Research Partners issued a ‘Sell’ rating on Nvidia (NVDA) with a $100 price target, despite the stock closing at $114.50, up 2.59%, citing overvaluation and AI-related risks.
- The firm highlighted deployment challenges with Nvidia’s systems, including cooling and configuration issues, and a “murky” return on AI investments as enterprises struggle to find viable use cases.
- Seaport warned of growing competition from hyperscalers developing their own chips and a potential slowdown in AI budgets by 2026, suggesting Nvidia may underperform compared to peers.
Earlier this week, Seaport Research Partners initiated coverage on Nvidia (NVDA) with a rare ‘Sell’ rating and a $100 price target, highlighting concerns over the semiconductor giant’s stretched valuation amid growing risks in the AI sector, despite the stock closing at $114.50 on Friday, up 2.59% or nearly 3 points. The brokerage acknowledged Nvidia’s leadership in the AI spending boom, particularly with its next-gen Blackwell chips, which are sold out for the year, but cautioned that the stock’s prospects are already priced in, limiting upside potential. Seaport pointed to significant deployment challenges with Nvidia’s systems, including complexities in cooling, configuration, and orchestration, which could hinder enterprise adoption and returns on AI investments.
The firm’s research underscores a broader uncertainty among enterprise customers, who are still grappling with identifying viable use cases to justify their substantial AI expenditures, casting doubt on the sustainability of current investment levels. Seaport also highlighted competitive pressures, noting that Nvidia’s largest customers – hyperscalers, including Amazon Web Services (AWS), Microsoft Azure, and Google Cloud – are developing their own chips, creating internal alternatives that could erode Nvidia’s market dominance over time. This trend, combined with a projected slowdown in AI budgets by 2026, poses a risk of Nvidia underperforming relative to its peers, even if the AI sector continues to perform well in the near term.
While stopping short of labeling AI a bubble, Seaport’s outlook suggests that the hype surrounding AI may not translate into proportional gains for Nvidia, given the “murky” returns on investment and operational hurdles. The company, a key player in AI infrastructure with its GPUs powering advancements in machine learning and data centers, faces a pivotal moment as it navigates these challenges. Investors may need to weigh Nvidia’s short-term momentum against the longer-term headwinds Seaport anticipates, particularly as competition intensifies and the AI landscape evolves. The brokerage’s cautious stance reflects a broader scrutiny of whether Nvidia can maintain its growth trajectory in an increasingly complex and competitive environment.
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