By Nvidia Corp (NASDAQ: NVDA) came in well ahead of Street estimates for its fourth quarter last night but one Wall Street analyst continues to see some challenges for the AI darling ahead.
KinNgai Chan of Summit Insights downgraded Nvidia stock to “hold” on Thursday, citing DeepSeek as a potential threat to the demand for its products.
“We believe risk-reward is no longer favourable for the stock due to persistent high whispers numbers and rumour of entry into the PC Client MPU market,” he argued in a research note today.
Nvidia stock is down about 3.0% at the time of writing.
Chan expects NVDA to lose ground in inference
Nvidia now expects its revenue to print at $43 billion in the first quarter which translates to another 65% increase on a year-over-year basis.
Still, the Summit Insights expert downgraded Nvidia stock today because he’s concerned that large language models (LLMs) in the future may require significantly less computing power.
“We believe the lower computing power requirement for inference, while not evident today, will undoubtedly have a negative impact to NVDA’s financial performance in the medium to longer term,” he added in a report on Thursday.
Versus its year-to-date high, the semiconductor stock is currently down more than 15%.
Why is Nvidia stock price down on Thursday?
Despite a solid Q4 release and upbeat guidance, Nvidia’s stock price action today suggests investors are used to getting much more from the AI chips giant.
After all, the Nasdaq-listed firm guided for about a 65% annualised growth in its first quarter – a massive slowdown from a 262% increase it noted in the same quarter last year.
And that’s when NVDA chief of finance Colette Kress expects a meaningful increase in Blackwell sales in Q1.
That next-gen artificial intelligence accelerator brought in $11 billion for Nvidia in the fourth quarter.
Plus, a 0.032% dividend yield on the AI stock is a bit too small to attract investors.
Nvidia disagrees with Summit Insights
Investors should also note that Nvidia itself doesn’t seem to agree with Summit Insights’ concerns.
The multinational expects the need for its AI chips to increase many fold with the evolution of LLMs.
In fact, future models could “require 100 times more compute per task compared to one shot inferences,” according to its chief financial officer.
Nvidia is typically seen as the leader in “training”, leaving adequate room for peers to build a name for themselves in “inference”.
However, the “vast majority of our compute today is actually inference,” its chief executive Jensen Huang confirmed on the earnings call last night.
Other Wall Street analysts seem to disagree with KinNgai Chan as well. The consensus rating on Nvidia stock currently sits at “buy” with upside to $176 on average or up another 40% from here.
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