“Time to take profits,” says top investor about Nvidia shares

Nvidia (NASDAQ:NVDA) is riding a strong wave of positive momentum, with positive news coming from all directions. The AI ​​chip giant continues to dominate the data center market and with its new Blackwell chipsets already sold out for next year, Nvidia shows no signs of slowing down.

Additionally, Nvidia’s impending inclusion in the Dow Jones Industrial Average this Friday should provide further gains as index-tracking funds are required to add NVDA shares to their portfolios, potentially driving the stock even higher.

However, for a top investor known by the pseudonym The Value Portfolio, this latest development is a good opportunity to lock in some profits.

“Nvidia’s inclusion in DJI, which will force ETF purchases and potentially push the company back to all-time highs, is a good time to exit,” writes the 5-star investor, who is in the top 1% of stocks Street belongs to professionals.

Value Portfolio notes that NVDA’s current valuation is not consistent with its growth prospects. To justify further share price increases, Nvidia would need to maintain 55% annual revenue growth over the next six years – a challenge for a company already worth $3.4 trillion.

There are several reasons for investors’ pessimism. First, AMD could start to eat into NVDA’s market share. As evidence, Value Portfolio points to Meta, one of Nvidia’s largest customers, which recently started running open source models on AMD servers. For Value Portfolio, this shift suggests that Nvidia’s moat may not be as robust as previously thought, while highlighting AMD GPUs as a cost-effective alternative.

Another investor concern is that the majority of NVDA’s revenue comes from just a handful of customers, all of which are other mega-tech companies. This poses a threat to NVDA, as its customers may well be able to develop some of these capabilities themselves.

“This competition from its largest customers, who, unlike Nvidia, deal directly with the final models, could pose a massive threat to Nvidia’s margins,” the investor added.

To this end, The Value Portfolio has assigned a “Strong Sell” rating to NVDA shares, encouraging investors to benefit from the current price increase. (To view The Value Portfolio’s track record, click here)

The value portfolio’s assessment stands in sharp contrast to the general mood on Wall Street. With 39 “Buy” ratings and 3 “Hold” ratings, NVDA enjoys a consensus Strong Buy rating. Its 12-month average price target of $153.86 suggests a potential gain of 13% next year. (See NVDA stock forecast)

To find good stock trading ideas at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ stock insights.

Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is for informational purposes only. It is very important to do your own analysis before investing.