Nvidia’s (NASDAQ: NVDA) stock has recently faced a rare downgrade, with analysts highlighting possible short-term margin constraints for the chip manufacturer.
Phillip Securities specifically issued a cautious downgrade, changing its rating from ‘Buy’ to ‘Accumulate.’
Analyst Yik Ban Chong from the investment management firm made this decision despite Nvidia’s robust performance in the third quarter of fiscal year 2025. However, concerns were raised regarding the anticipated reduction in initial gross margins for Nvidia’s upcoming Blackwell chip series.
Scheduled to commence production in Q4 2025, the initial gross margins for Blackwell are projected to fall within the “moderate to low-70s,” which is below Nvidia’s usual standards.
Though margins are expected to improve to the mid-70s as production processes scale, the immediate profitability challenges have affected investor confidence.
In spite of the downgrade, Phillip Securities lifted its price target for Nvidia from $155 to $160, indicating robust belief in the company’s long-term growth trajectory.
“We are downgrading NVDA to Accumulate from Buy due to recent price movements, though we raise our price target to $160 (previously $155). Margin assumptions for FY26e have been lowered in line with management guidance for Blackwell’s lower margins,” Chong stated.
Moreover, the analyst adjusted Nvidia’s FY26 revenue and PATMI (Profit After Tax and Minority Interests) estimates upwards by 5% and 7%, respectively.
These changes were influenced by the expected strong advancement of Nvidia’s Blackwell and Hopper platforms, alongside favorable corporate tax forecasts.
Concerns About Blackwell Chips
Interestingly, recent worries regarding the Blackwell chips have surfaced, particularly regarding initial delays and reports of overheating issues. These matters could profoundly affect NVDA’s outlook; however, Nvidia clarified during the Q3 earnings report that there are no issues with the chip.
Nvidia has reassured investors that Blackwell is currently in “full production” and advancing at “full steam,” with plans to increase shipments on a quarterly basis.
CFO Colette Kress noted that 13,000 Blackwell samples were shipped this quarter, while CEO Jensen Huang emphasized the chip’s promising start, revealing that it has already generated billions in revenue.
Following the earnings report, other analysts on Wall Street have also expressed optimistic forecasts for Nvidia’s stock. For example, in a note dated November 21, Hans Mosesmann from Rosenblatt Securities maintained a Buy rating and increased the price target from $200 to $220. Similarly, Cody Acree of Benchmark Capital reiterated a Buy rating, raising his price estimate from $170 to $190.
Even with Nvidia’s remarkable growth in 2024, there are lingering concerns about possible challenges in the upcoming months. As reported by Finbold, technical analyst Larry Tentarelli indicated that Nvidia’s substantial valuation of $3.6 trillion might restrict further stock appreciation. He suggested that the company could potentially fall behind other AI stocks with lower valuations.
Nonetheless, Tentarelli proposed that the stock could rebound to $175 if it surpasses the $152 resistance level.
Analysis of NVDA Price
As of the latest update, Nvidia (NVDA) was trading at $145.67, reflecting a decrease of about 0.68% in the last 24 hours. This trend aligns with the volatility observed since the earnings report. Year-to-date, the stock has skyrocketed over 200%.
In conclusion, despite immediate margin worries, Nvidia’s vigorous performance, promising pipeline, and positive long-term outlook highlight its growth potential even amid short-term fluctuations.
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