- Nvidia stock has peaked after a 1,776% gain over five years, says DA Davidson tech analyst Gil Luria.
- Nvidia’s growth is slowing, with Q4 revenue at its lowest growth rate in nearly two years.
- The stock tumbled 6% on Thursday after fourth-quarter earnings failed to impress investors.
After gaining 1,776% in five years, one analyst says Nvidia looks like it its hit a peak.
That’s according to Gil Luria, a tech analyst at DA Davidson. Luria wrote on Thursday after the chip titan reported earnings results that growth is set for a slowdown.
“This is as good as it gets for Nvidia,” he told CNBC on Thursday, the same day the stock saw a sharp decline of as much as 8%. Shares finished the day down 6% after the company’s fourth-quarter earnings disappointed, dragging the tech-heavy Nasdaq 3% lower.
For Luria, the concern is not whether Nvidia is executing on its strategy — because it is, with the company’s fiscal year 2025 revenue more than doubling year-over-year to $130.5 billion.
Instead, the concern is that Nvidia’s growth is going to continue to decelerate.
Clocking in at 78%, Nvidia’s year-over-year fourth-quarter revenue growth was the company’s slowest quarter of growth in nearly two years.
Luria told Business Insider about some of the obstacles he sees ahead for the chip maker.
1. Peak demand for AI chips
First, spending for Nvidia’s GPU chips by its largest customers, like Microsoft, Meta Platforms, and Amazon, has likely peaked, even when considering massive increases to their capital expenditures guidance last month.
“Their big customers increased their spend the most into Q4 as they ever have and probably ever will,” Luria said. “Two of their three largest customers have said capex will be flat into the first half of the year.”
That’s a big deal considering just over one-third of Nvidia’s revenue comes from just three customers. This concern plays into the idea that there will eventually be an oversupply of Nvidia’s GPU chips and waning demand for compute, especially as companies start to scrutinize the return on investment in AI.
“Despite demand in the near-term continuing to be strong, we still believe a decline in demand for NVIDIA compute is inevitable as customers begin to scrutinize their ROI on AI compute,” Luria explained.
2. Increased competition from China
China is another big concern, with Luria arguing that even without the Trump administration’s tariffs, Nvidia is facing increased competition.
“There will be more restrictions on sales of chips to China so those sales are going to be under pressure,” Luria said.
In his earnings update note, Luria highlighted that Chinese labs are reportedly shifting their inference workloads to GPU chips made by Huawei, “underscoring the growing competiveness of compute in the region.”
3. Falling profit margins
But perhaps the most important factor is the see-sawing of Nvidia’s profit margins due to its accelerated cadence of releasing a new GPU chip every year.
“Everytime they get to 75% gross margins, a new product is going to drag it back down to the low 70s,” Luria said.
Nvidia’s profit margin guidance was a weak spot in its latest earnings report, with the company expecting a gross profit margin of about 71% in the first quarter as it continues to work through the ramp in production of its Blackwell GPUs.
Even with the tepid outlook, Luria isn’t bearish on Nvidia. The analyst rates Nvidia at “Neutral” with a $135 price target.
Shares of Nvidia initially see-sawed between gains and losses after it released its fourth-quarter earnings results, but the stock eventually moved decisively lower in Thursday’s trading session, down about 4% to $126.49.
