Among the major Wall Street shops, Seaport stands alone with its solitary sell rating on shares of Nvidia . In a Sunday note, Seaport analyst Jay Goldberg reiterated his sell rating on the chipmaker. Goldberg’s $140 price target is about 21% below Nvidia’s Friday closing price of $177 per share. The stock has surged 33% this year, but shares have fallen nearly 12% over the past month. NVDA YTD mountain NVDA YTD chart While Goldberg believes that Nvidia’s business remains solid, the rush of the AI boom has led to a variety of “sales mechanisms” and “fairly opaque accounting.” “Last week, the Internet was full of all accounting theories around Nvidia, which we will address. We do not see anything malicious taking place,” he wrote. “Put simply, we think Nvidia faces growing competitive pressure and has been leaning hard on a variety of sales mechanisms to adapt. These measures are not fully reflected in financials, but they are already material and look likely to grow significantly next year.” For instance, Goldberg pointed specifically to the $26 billion worth of Nvidia’s pre-paid cloud compute expenses, which the chipmaker has expressed will be used for R & D and cloud offerings for its DGX platform. The analyst said R & D would hardly use the entire amount. Instead, he sees it as a form of rebate that Nvidia has offered certain clients. “We think it is much more plausible that this amount recognizes the ‘backstops’ the company has put in place with a number of its customers. Under these arrangements, companies which buy Nvidia systems get obligations that Nvidia will buy a certain amount of excess capacity those companies have running those Nvidia systems,” he wrote. Meanwhile, Nvidia’s working capital has grown significantly, which the company has reasonably maintained is a bullish sign, indicating strong demand. But Goldberg highlighted the number of investments and “commitments” Nvidia has made to its customers as another potential warning sign. “The company spent $6 billion this year in private companies. It has commitments for another $17 billion (including $5 billion to Intel ). The OpenAI agreement is not signed but could add another $100 billion to the list,” he said. “Nvidia can reasonably argue that these investments will pay for themselves as those companies raise more outside money and use the proceeds to buy Nvidia systems. Nonetheless, the scope of this effort is growing considerably, which we think speaks to the growing competitive market Nvidia faces.” As another tailwind, the analyst also pointed to growing competition coming from Google’s internally designed TPUs. Even though TPUs cannot be used by all clients, Goldberg wrote that they can already outperform Nvidia systems on many metrics, and he is surprised by “the degree to which Google has become adept at promoting the use of TPU to third parties.” Out of the 66 analysts currently covering Nvidia, 59 maintain a strong buy or buy rating. Six analysts see the stock as a hold, while just one has assigned it an underperform or equivalent rating. Tipranks data shows Seaport as the source of this only sell rating.
