Set a target price of $100! NVIDIA's "only short": This is not the first time I've seen a bubble
Seaport Global analyst Jay Goldberg believes that NVIDIA's astonishing growth currently relies heavily on massive capital expenditures from a few tech giants. However, the actual returns generated from these substantial investments have been very limited so far. He argues that this model is very similar to the telecommunications infrastructure construction during the dot-com bubble, when companies like Cisco saw their stock prices soar due to anticipated internet traffic, but when those expectations did not materialize immediately, their stock prices suffered severe blows. More than twenty years later, Cisco's stock price has still not returned to its peak in 2000
Amid the fervent pursuit of NVIDIA on Wall Street, one analyst is swimming against the tide.
Among the 80 analysts covering NVIDIA, Seaport Global Securities analyst Jay Goldberg has given the only "sell" rating, setting a target price of $100.
"All the hype around AI, I am skeptical," Goldberg said in an interview with Bloomberg, "This is not the first time I've seen a bubble."
He likens the current situation to the dot-com bubble around the year 2000 and warns that once the massive spending supporting high valuations slows down, the market landscape could quickly reverse.
This stance sharply contrasts with the prevailing optimism in the market, as the average target price among Wall Street analysts is currently around $220, indicating an 18% upside potential.
History Repeating? Aiming at the Dot-Com Bubble
In Goldberg's view, NVIDIA's astonishing growth currently relies heavily on massive capital expenditures from a few tech giants. Microsoft, Alphabet, Amazon, Meta, Oracle, and OpenAI are racing to build AI infrastructure, and their procurement demands have created NVIDIA's market value of up to $4.5 trillion.
By 2025, these five publicly traded companies are expected to have capital expenditures nearing $400 billion, with OpenAI also committing over $1 trillion.
However, Goldberg cautions investors to pay attention to how limited the actual returns from these massive investments have been so far.
He believes that this model is very similar to the telecom infrastructure construction during the dot-com bubble, when companies like Cisco saw their stock prices soar due to anticipated internet traffic, but when those expectations were not immediately realized, stock prices took a hit. More than twenty years later, Cisco's stock price has still not returned to its 2000 peak.
Goldberg warns:
The pattern we see now feels very similar to that time.
To a large extent, we will build all these AI facilities for psychological reasons. At some point, spending will stop, and then the whole system will collapse, and we will see a reset.
Power, Leverage, and Limited Upside Potential
In addition to historical comparisons, Goldberg also stated that since the market view is that NVIDIA's AI chips are essentially sold out, the question arises: where will the further upside in stock prices come from? "There aren't many drivers for upside."
Goldberg also questions the sources of incremental power for all the newly built data centers, which remain unclear. Additionally, leverage surrounding data center development is continuously accumulating:
When you trace the whereabouts of all these GPUs, you delve into the details of "new clouds" (neoclouds) and all the ongoing power and real estate transactions
It is easy to imagine that the collapse of an inconspicuous company could trigger a chain reaction throughout the entire supply chain.
It is worth noting that Goldberg's "sell" rating does not suggest that investors should short the stock. He explicitly stated that he admires NVIDIA and its CEO Jensen Huang's leadership. In his view, "sell" means he expects the stock's performance to lag behind peers such as Broadcom, Qualcomm, and AMD.
Wall Street's Growing Concerns About the AI Bubble
Although Jay Goldberg is the only analyst to issue a "sell" rating, his concerns about the AI bubble are not unique on Wall Street.
Goldman Sachs CEO David Solomon recently compared the current AI craze to the frenzy during the dot-com bubble.
According to the latest global fund manager survey from Bank of America, the proportion of respondents who believe there is a bubble in AI stocks has reached a historic high. Even OpenAI CEO Sam Altman, when asked if there is an AI bubble, answered affirmatively. These voices provide some degree of support for Goldberg's contrarian thinking.
When discussing his bearish rating, Goldberg also stated:
I haven't received any rebuttals to my argument.
Some say I'm too early... but no one has called me crazy. I think we all see signs of excessive exuberance in the AI field; while NVIDIA is a good company, it is not immortal.
Overwhelming Bullishness: "We are still in the early stages"
Despite Goldberg's bubble warning, the mainstream view on Wall Street remains firmly bullish. Among the 80 analysts covering NVIDIA, 73 have given it a rating equivalent to "buy," while another 6 hold a "hold" view.
Jim Awad, Senior Managing Director at Clearstead Advisors, stated:
AI is a generational cycle that will last for years, and we are still in the early stages, not even at mid-stage yet. NVIDIA is a key player in this, driving the economy and the stock market.” The firm holds NVIDIA shares.
Moon Surana, a portfolio manager at Harding Loevner LP, expressed a similar view, believing that we are still in the early investment stage,
There are currently no signs of overcapacity, and no GPUs are sitting idle.
The most optimistic analyst in the market is Frank Lee from HSBC, who recently upgraded NVIDIA's rating to "buy," with a target price of up to $320, citing that the market demand for AI accelerators will surpass that of the current largest clients
