Nvidia Corp. (NVDA) has enjoyed a triumphant rise this year, securing the fifth-highest valuation for a publicly listed company globally. However, as its stock price continues its seemingly unstoppable climb, concerns flicker amidst the optimism.
What Happened: At the heart of the debate lies an observation made by UBS analyst Timothy Arcuri.
After checking with customers, Arcuri reported a decrease in lead times for Nvidia’s chips, indicating available shipment slots in the latter half of 2024.
Arcuri interpreted this as “upside potential for shipments and revenue” even after saying “Normally, this is bad.” Shortened lead times traditionally paint a less rosy picture, often suggesting waning demand.
This interpretation sparked a stir online, drawing a blunt “No, that’s bad…if true,” from none other than Jim Chanos, renowned for his successful short bets on companies like Enron and Tesla.
Mizuho Securities analyst Vijay Rakesh shared Arcuri’s findings, confirming shorter lead times for Nvidia’s flagship H100 AI accelerator chips. However, he emphasized the continued tightness of supply and robust demand.
No, that’s bad…if true. $NVDA https://t.co/lW05KXLwQu
— Diogenes (@WallStCynic) February 14, 2024
Why It’s Important The concern stems from Nvidia’s strategic position as a flagbearer for the burgeoning AI revolution. The company’s deep integration with this hot-button technology has fueled significant growth in recent quarters. However, several potential risks bubble beneath the surface.
Following the third-quarter earnings release, social media chatter focused on the emergence of Singapore as one of Nvidia’s largest customers, raising concerns about over-reliance on a single market.
Analysts acknowledge the possibility of the AI bubble bursting within the next three to five years. While they remain confident in AI’s long-term benefits for productivity and economic growth, the possibility of a short-term correction casts a shadow.
While Nvidia currently enjoys a near-monopoly position, competition from peers like Advanced Micro Devices (AMD) and the rise of in-house AI development by customers could chip away at its dominance.
Despite these concerns, counterpoints remain. Analysts generally hold faith in the long-term impact of AI…
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