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Investing.com-- Summit Insights downgraded its rating on Nvidia (NASDAQ:NVDA) on Wednesday, stating that while the company is expected to continue doing well, especially after strong quarterly earnings, it no longer presented a favorable risk-reward scenario.
Summit downgraded Nvidia to Hold from Buy.
The downgrade came even as Nvidia clocked strong fourth-quarter earnings and presented an upbeat outlook for the current quarter. But the company flagged a bigger-than-expected contraction in its margins, as it ramps up production of its next-generation Blackwell series of artificial intelligence chips.
Summit said that it expects Nvidia to continue outperforming market expectations, based on current market conditions and product leadership.
“We are, however, downgrading the stock because we believe risk-reward is no longer favorable for the stock due to persistent high whispers numbers and rumor of entry into the PC Client MPU market,” Summit analysts wrote in a note.
They added that lower computing requirements from more efficient artificial intelligence programs, and a shift towards inference from training, will also have a negative impact on Nvidia’s financial performance in the medium-to-longer-term.
“We believe NVDA’s outperformance and growth could decelerate into 2HFY26 as supply of NVDA’s GPUs catches up to industry demand,” Summit analysts said.
Nvidia soared about five-fold in valuation over the past two years, as it rode an AI-fueled spike in demand for its advanced chips.
But the stock’s momentum was seen waning in recent weeks, as investors questioned just how much more space it had to run. Recent earnings prints also showed that AI was not the major revenue driver it was priced to be, especially in Nvidia’s biggest tech customers on Wall Street.
Doubts over Nvidia’s long-term prospects also rose over the past month with the release of China’s DeepSeek AI model. The model appeared to be far more efficient than popular rivals such as OpenAI’s ChatGPT, sparking more questions over the need for advanced AI infrastructure.
Investors appeared less than enthused with Nvidia’s earnings and management commentary, with the stock falling as much as 2% in aftermarket trade. It was also nursing a series of steep losses over the past week.