Analysts at Seaport Global Securities have issued a sell rating on Nvidia (NASDAQ: NVDA), setting a price target of $140.
The firm highlighted growing competitive pressure in the semiconductor sector as a key concern. The new NVDA target implies a 20% correction from the stock’s last closing price of $176.
Notably, the analysts observed that Nvidia has been deploying various sales strategies to adapt to the competitive environment, though these measures are not yet fully reflected in its financials. Seaport expects these strategies to expand materially in the coming year, potentially affecting profitability.
Nvidia holds $26 billion in cloud compute service agreements, which it says will fund research and development and its DGX offerings. To this end, the analysts cautioned that these agreements function similarly to rebates and, if fully recognized, could reduce gross margins by approximately 400 basis points next year, or about $0.30 per share.
At the same time, competition from alternative technologies, notably Google’s TPUs, presents challenges, as they outperform Nvidia systems on several metrics despite limited applicability.
“TPUs are not for everyone, but can outperform Nvidia systems on many metrics. Growing commitments and investments to customers. The company spent $6 billion this year in private companies. It has commitments for another $17 billion (including $5 billion to Intel),” the analysts said.
Nvidia has increased investments in private companies, spending $6 billion this year and committing another $17 billion, including $5 billion to Intel. A pending agreement with OpenAI could add up to $100 billion in contractual obligations.
Wall Street bullish on NVDA stock
Overall, Seaport Global Securities remains negative on Nvidia. However, the broader Wall Street consensus is bullish. Among 41 analysts tracked by TipRanks, 39 recommend buying the stock, one suggests holding, and one advises selling.
The analysts project an average target of $257.72 over the next 12 months, implying a potential 45.6% upside from Nvidia’s closing price. The most optimistic forecast places the stock at $352, while the lowest estimate sits at $200.
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