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Investing.com -- Nvidia faces intensifying competitive and financial headwinds that could weigh on its performance into next year, according to Seaport Research Partners analyst Jay Goldberg, who reiterated his Sell rating and $140 price target on the chipmaker in a note Monday.
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Goldberg said he remains negative as signs of competition increase, arguing that Nvidia is relying on financial arrangements that are not fully reflected in its results but are already becoming “material and likely to grow significantly next year,” according to Seaport Research.
One of the analyst’s central concerns is the company’s growing cloud compute commitments. Nvidia has “$26 billion of cloud compute service agreements,” which it says will support research and its DGX platform.
Seaport Research describes these agreements instead as “a form of rebate,” and estimates that properly recognising them “would take 400bps off gross margins next year, or at least $0.30.”
Goldberg also highlighted rising pressure from Google, saying the company has “surprised with its ability to promote third party use of its internally designed TPUs.”
While TPUs “are not for everyone,” he said they “can outperform Nvidia systems on many metrics,” raising competitive risks as AI workloads diversify.
A third issue is Nvidia’s growing financial commitments to customers. The company has already “spent $6 billion this year in private companies” and has “commitments for another $17 billion (including $5 billion to Intel).”
Seaport warns that an unsigned agreement with OpenAI “could add another $100 billion to the list.”
Finally, Goldberg pointed to a sharp rise in working capital this quarter. While Nvidia says this signals strong demand, Seaport argues it also reflects the company “smoothing out working capital needs among its ODM customers.”