Prediction: Nvidia Just Received Its First Wall Street Sell Rating — and More Will Follow After May 28

Though President Donald Trump’s tariff coverage has dominated the dialogue on Wall Road over the past six weeks, it is the evolution of synthetic intelligence (AI) that is captivated buyers for nicely over two years.

In its easiest type, AI empowers software program and methods with the capability to cause and act on their very own, in addition to affords the potential to study new skillsets with out the necessity for human oversight. It is a game-changing expertise with broad international software that the analysts at PwC imagine can enhance worldwide gross home product (GDP) $15.7 trillion by 2030.

Picture supply: Getty Photos.

No firm has extra straight benefited from the AI revolution than Nvidia

Whereas an estimated $15.7 trillion addressable market leaves room for dozens, if not a whole lot, of winners, no firm has been a extra direct beneficiary of the rise of AI than semiconductor colossus Nvidia (NVDA 5.41%).

Virtually in a single day, Nvidia’s Hopper (H100) graphics processing unit (GPU) turned the popular “brains” powering enterprise AI-accelerated information facilities. This has been adopted up by the next-generation Blackwell GPU structure, which may additional expedite compute wants and is extra power environment friendly than its predecessor.

In simply two fiscal years (Nvidia’s fiscal 12 months ends in late January), Nvidia’s web gross sales skyrocketed from $27 billion to $130.5 billion. For context, Wall Road’s consensus requires practically $201 billion in full-year gross sales for fiscal 2026 (this 12 months) and $248 billion in fiscal 2027.

Given Nvidia’s supercharged progress fee and the truth that no different direct competitor has come remotely near matching its mixture of compute pace and power effectivity, it is no shock that Wall Road analysts have rallied across the inventory market’s AI darling. In late January, I famous that the handfuls of Wall Road analysts overlaying Nvidia all had respective worth targets that was larger than the place shares then traded.

However instances are a-changing!

Nvidia simply obtained its first Wall Road promote score — and after Could 28, which is the date Nvidia will unveil its fiscal 2026 first-quarter working outcomes, I absolutely anticipate extra analysts to observe go well with.

One Wall Road analyst is bucking widespread sentiment

In late April, Seaport Analysis Companions’ senior analyst Jay Goldberg initiated protection on Nvidia with a $100 worth goal (a Wall Road low) and a promote score.

Although Goldberg acknowledged that Nvidia has achieved lots proper and its Blackwell GPU is extremely sought-after, he believed the bull case was absolutely priced in, with quite a few draw back catalysts ready within the wings.

For one, Goldberg believes it’s going to be tough for Nvidia to surpass Wall Road’s lofty consensus expectations on condition that it is maxed out its order capability for Blackwell in fiscal 2026. Though world-leading chip fabrication firm Taiwan Semiconductor Manufacturing is quickly increasing its chip-on-wafer-on-substrate (CoWoS) capability — CoWoS is crucial for the packaging of high-bandwidth reminiscence wanted in AI-accelerated information facilities — it is nonetheless holding Nvidia again from promoting much more of its next-gen {hardware}.

Goldberg additionally anticipates that companies will take a tough take a look at their spending later this 12 months and into calendar 12 months 2026. Whereas Seaport’s senior analyst would not anticipate an AI bubble to type and burst, he does imagine that companies are nonetheless within the strategy of feeling out real-world use instances for synthetic intelligence. Goldberg suggests it will end in slower AI spending/orders within the quarters to come back.

Moreover, and never surprisingly, Goldberg alluded to export restrictions to China as a front-and-center headwind. As a reminder, the Joe Biden Administration (since October 2022) and Trump administration positioned stringent export restrictions on many high-powered AI chips and associated tools to China. The world’s No. 2 financial system by GDP generates billions of {dollars} in quarterly gross sales for Nvidia, which might notably shrink if tariff-related uncertainty persists and commerce relations between the U.S. and China bitter.

However I imagine that is simply the tip of the iceberg, and different Wall Road analysts will observe in Goldberg’s footsteps as soon as Nvidia’s lifts the proverbial hood after the closing bell on Could 28.

Picture supply: Getty Photos.

Extra promote rankings are doubtless for Wall Road’s AI darling

Just like Goldberg, I am comfortable to present Nvidia credit score the place credit score is due. The corporate’s Hopper and Blackwell chips will doubtless keep their compute benefits and stay sought-after {hardware} for AI information facilities. However Nvidia’s practically $2.9 trillion valuation suggests it has large sneakers to fill — and there are extra headwinds upcoming than Seaport’s senior analyst has listed.

Arguably the highest problem for Nvidia is the inner competitors it is contending with. Whereas most buyers and analysts deal with direct rivals like Superior Micro Gadgets and Huawei, they’re utterly lacking that a lot of Nvidia’s prime prospects by web gross sales are internally creating AI chips and options to make use of of their information facilities.

Regardless of most of those firms noting that this internally developed {hardware} will work side-by-side with Nvidia’s GPUs, it would not change the truth that it will result in cheaper and extra available AI options that are not backlogged. It is a plain-as-day recipe for Nvidia to overlook out on future information middle market share.

Equally necessary, Nvidia is dropping its greatest aggressive benefit; and no, I am not speaking concerning the compute pace of Hopper or Blackwell. Fairly, I am alluding to the advantages it is reaped from AI-GPU shortage.

Although Nvidia cannot meet the overwhelming demand for its Blackwell GPU structure, it is not stopping AMD from bringing less-costly next-generation chips to market. It is also not slowing the aforementioned inner innovation of Nvidia’s prime shoppers. As this {hardware} enters high-compute information facilities, it reduces the AI-GPU shortage and immense pricing energy that fueled Nvidia’s gross margin.

NVDA Gross Profit Margin (Quarterly) information by YCharts.

One 12 months in the past, in fiscal 2025, Nvidia reported a scorching-hot usually accepted accounting rules (GAAP) gross margin of 78.4%. Since then, its GAAP gross margin has declined each quarter, and is predicted to have fallen to an estimated 70.6% (+/- 50 foundation factors) for the fiscal first quarter, which it’s going to report on Could 28. We’re witnessing Nvidia’s main benefit wane earlier than our eyes.

Lastly, historical past would strongly recommend that synthetic intelligence will not escape a bubble-bursting occasion. Each next-big-thing expertise or innovation for greater than 30 years has endured a bubble early in its growth section. With an amazing majority of companies not optimizing their AI options, and even producing a constructive return on their AI investments, it as soon as once more seems that buyers have overestimated the early innings utility of a game-changing expertise.

When extra Wall Road analysts start being attentive to these elements, I predict the variety of promote rankings for Nvidia inventory will climb.