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Investing.com -- HSBC downgraded Nvidia Corp (NASDAQ:NVDA) to Hold from Buy, citing limited upside potential in the near term as the company enters a transition phase ahead of new AI market opportunities in robotics and autonomous vehicles.
Shares of the company were down 5.8% in early trading.
The brokerage also slashed its price target to $120 from $175, reflecting lower earnings estimates and a reduced target price-to-earnings (PE) ratio.
Nvidia’s share price has fallen 26% from its peak in January 2025, despite fourth-quarter results and first-quarter guidance meeting expectations.
HSBC expects Nvidia’s fiscal 2026 revenue to grow 62% year-over-year and earnings per share (EPS) to rise 58%. However, the firm now sees limited room for further earnings surprises, which could cap share price gains.
HSBC noted that Nvidia’s pricing power for its GPUs is weakening, limiting upside momentum. While the company previously benefited from strong AI GPU pricing and an improved product mix, recent GPU generations, such as the B300 and GB300 NVL72 rack architecture, have not seen major average selling price (ASP) increases.
The upcoming Vera Rubin platform is also expected to offer only marginal improvements until the Rubin Ultra upgrade in 2027.
The brokerage also cited potential re-rating headwinds, including uncertainty around cloud service provider capital expenditures and long-term demand from DeepSeek.
Supply chain mismatches could further constrain upside potential.
HSBC sees robotics and autonomous AI as Nvidia’s next major growth catalysts but believes revenue contributions from these markets will take time to materialize.
The firm cut its fiscal 2026 and 2027 EPS estimates by 8% and 18%, respectively, and lowered its target PE multiple to 25x from 34x, aligning with historical trough valuations.