Nvidia’s rally will lose steam next year as chip giant’s customers become competitors, analyst says

• Nvidia’s monster rally won’t last as the chipmaker faces long-term challenges, according to Gil Luria.

• Analyst DA Davidson predicted up to a 20% drop in Nvidia stock by the end of the year.

• Nvidia’s biggest customers could become competitors by developing their own AI chips, Luria warned.

Nvidia shares can’t keep climbing forever, and the chip giant will eventually suffer from slowing demand for its GPUs, according to DA Davidson analyst Gil Luria.

Luria told BNN Bloomberg on Tuesday that Nvidia is unlikely to see a significant decline in the near term. Profits in the final quarter will likely be “fantastic,” he said, predicting the company would report revenue of more than $25 billion.

However, the chipmaker’s long-term decline is inevitable as the company faces increased competition in the coming years, even from its own customers, he warned.

“The reason we’re not as optimistic as everyone else is that we’re looking at the horizon. What’s going to happen next year? What’s going to happen in 2026? We think “There’s more and more evidence that this can’t continue,” Luria says. comes from its customers.

Most of Nvidia’s business comes from its five largest customers, Luria said, which include Amazon, Meta, Microsoft, Alphabet and Tesla. These companies are also big competitors in the AI ​​race, and companies like Apple and Microsoft are reportedly developing their own AI chips.

And while some Nvidia customers are stockpiling its GPUs, demand will eventually dry up, Luria told Bloomberg, because companies can only stock up on a limited number of chips.

“As our expectations are significantly lower than consensus expectations for these years, our outlook is that there will be a day when revenues start to decline, and if no one expects that, the stock would experience a significant decline if that had to happen.” Luria warned.

Nvidia has enjoyed a meteoric rally over the past 18 months, with the stock nearly doubling in the past five months alone as AI hype continues to grip Wall Street. This has led some analysts to worry about the company’s high valuation, which is now higher than other tech titans like Alphabet and Amazon.

Luria is among the few bearish forecasters on Nvidia stock. Previously, he had advocated a drop in the company’s shares by as much as 20% by the end of the year, as the company was unlikely to maintain its rapid pace of growth.

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