{"id":54561,"date":"2023-08-29T19:22:40","date_gmt":"2023-08-29T23:22:40","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/nvidia-stock-hits-a-record-high-watch-these-3-things\/"},"modified":"2023-08-29T19:22:42","modified_gmt":"2023-08-29T23:22:42","slug":"nvidia-stock-hits-a-record-high-watch-these-3-things","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=54561","title":{"rendered":"Nvidia Stock Hits a Record High. Watch These 3 Things."},"content":{"rendered":"
\n

\n Nvidia
\n stock closed at an all-time high Tuesday. But there are three good reasons to think shares have peaked for now.\u00a0<\/p>\n

\n Nvidia
\n (ticker: NVDA) bears have largely been left licking their wounds this year as its shares have more than tripled and its market cap has surged beyond $1 trillion. Still, it\u2019s worth going over the risks that still remain for the chip maker.\u00a0<\/p>\n

\n

Customer Concern<\/strong><\/h2>\n

Nvidia is a classic \u2018picks and shovels\u2019 play\u2014a company that sells the tools for an industry trend and is therefore positioned to win no matter who comes out on top.\u00a0<\/p>\n

However, the \u2018picks and shovels\u2019 theory only works so long as customers keep lining up to try their luck. Independent analyst Richard Windsor, who publishes Radio Free Mobile, has argued generative AI services such as ChatGPT have set an unsustainable benchmark price of around $20 a month for their services.\u00a0<\/p>\n

\u201cFreely available models from the open-source community, combined with start-ups who need to get volume for their newly launched services, are going to start eroding the price of the services,\u201d Windsor wrote. He expects the price for AI services to settle at more like $20 a year.\u00a0<\/p>\n

If that happens, customers might tire of paying Nvidia\u2019s prices. Raymond James estimates it costs Nvidia $3,320 to make its cutting-edge H100 chip, which is sold to customers for $25,000 to $30,000.<\/p>\n

Analysts at Deutsche Bank said after Nvidia\u2019s earnings that they expect data-center customers to slow their rate of chip buying to \u2018digest\u2019 their purchases at some point. They kept a Hold rating on the stock after the earnings, and recommended waiting for a more favorable entry point.\u00a0<\/p>\n

China\u00a0Risks<\/strong><\/h2>\n

Nvidia took care to dispel concerns that an unsustainable surge in Chinese demand was powering its growth. The company noted its proportion of revenue coming from China was within its historical average of 20%-25% and said even further restrictions wouldn\u2019t have an immediate material effect on its results.\u00a0<\/p>\n

But that doesn\u2019t mean there aren\u2019t longer term risks.\u00a0\u00a0<\/p>\n

\u201cOver the long term, restrictions prohibiting the sale of our data center GPUs to China, if implemented, will result in a permanent loss of an opportunity for the U.S.,\u201d Nvidia\u2019s Chief Financial Officer Colette Kress told analysts on an earnings call.\u00a0<\/p>\n

It\u2019s not only geopolitics that poses a risk to Nvidia\u2019s business in China. The company\u2019s second-quarter automotive revenue fell 15% from the previous quarter, largely due to lower demand in China.\u00a0<\/p>\n

With China facing mounting economic troubles, Nvidia customers such as
\n Baidu
\n (BIDU), ByteDance, Tencent, and
\n Alibaba
\n (BABA) might not be so keen to pay up for its chips and could look to local suppliers instead. Local media in China recently reported the head of AI company HKUST Xunfei said Huawei\u2019s compute GPU capabilities are now on par with Nvidia\u2019s A100\u2014an advanced chip which Nvidia can\u2019t sell to Chinese customers.\u00a0<\/p>\n

Increasing Competition \u00a0<\/strong><\/h2>\n

Nvidia has a dominant position in sales of graphics-processing units for AI related purposes, with around a 90% share of the market.\u00a0<\/p>\n

However, that\u2019s not guaranteed to be the case forever. Advanced Micro Devices (AMD) is launching its MI300 data-center GPU this year and could take advantage of constraints in Nvidia\u2019s supply chain to grab some market share.\u00a0<\/p>\n

Some of Nvidia\u2019s own customers are also shaping up to be its competition.
\n Alphabet\u2019s<\/span>
\n (GOOGL) Google has its custom Tensor Processing Units, or TPUs, although it also partners with Nvidia for various AI applications.
\n Amazon.com
\n (AMZN) also has custom chips which it also offers as alternatives to Nvidia\u2019s GPUs.\u00a0<\/p>\n

None of this means that Nvidia is guaranteed to go down from here. Its rapid growth has kept worries about its high valuation in check and it has developed a formidable competitive position based on both its hardware and its software offering. So far, it has defied all of the concerns cited.\u00a0<\/p>\n

However, it\u2019s not necessarily one factor or another that could hit Nvidia stock. A mixture of issues and the increasingly high hurdles it faces to beat expectations could be enough to puncture confidence in the stock.\u00a0The company\u2019s outstanding performance so far is only moving the bar higher for the stock to keep pushing upward. <\/p>\n

Write to Adam Clark at adam.clark@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Nvidia stock closed at an all-time high Tuesday. But there are three good reasons to think shares have peaked for now.\u00a0 Nvidia (ticker: NVDA) bears have largely been left licking their wounds this year as its shares have more than tripled and its market cap has surged beyond $1 trillion. Still, it\u2019s worth going over […]<\/p>\n","protected":false},"author":1,"featured_media":54562,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-54561","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nNvidia Stock Hits a Record High. Watch These 3 Things. | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Nvidia stock closed at an all-time high Tuesday. 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