A Citi analyst lowered his target price on Nvidia stock. What does he fear?

A Citi analyst has lowered the target price of Nvidia shares. He still expects the chipmaker's securities to grow by almost 20% and advises to buy them, but he expresses fears that the company's position is under pressure due to competition in the field of AI-chips. According to the analyst, on the one hand Nvidia is under pressure from competitor Broadcom, and on the other hand - Google, which is actively developing its AI-chips and provides computing power to Nvidia's competitors. Since the beginning of the year, the market value of Nvidia has grown by more than 26%, and Broadcom - by almost 49%.

Citi analyst Atif Malik reduced the target price of Nvidia shares from $210 to $200, while maintaining a recommendation to buy the company's securities, CNBC reports. Citi's new target implies the potential for the company's shares to grow by almost 20% from the closing level of the last trades.

Citi warned that Nvidia's competitive advantage is under pressure from other AI chipmakers. For example, last week another chipmaker, Broadcom, reported strong revenue growth and announced a $10 billion order for custom AI chips (XPUs) from a fourth, as yet unnamed major customer. Against this backdrop, Malik expects Nvidia's chip sales in 2026 to be about 4 percent below the previous forecast. In addition to competition from Broadcom, Nvidia is also under pressure from Google's increasing AI chip production. According to the analyst, this is starting to pose a direct threat to Nvidia's GPU sales.

"We previously forecast that by 2026, sales of [Broadcom's AI chips] XPUs will surpass [Nvidia's GPUs] GPUs. We estimate that the accelerated adoption of XPUs is due to the fact that Google is effectively competing with Nvidia by providing computing power to its rivals - such as Meta, OpenAI and Oracle. This is a risk we've already highlighted," Ma noted. He estimated that such a scenario could reduce Nvidia's GPU sales by about $12 billion in 2026.

Nevertheless, Malik noted that his projections for Nvidia's financial results for 2025-2026 remain slightly above average market estimates. He attributed this to increased spending on so-called neoblacks and sovereign AI projects - national initiatives to build and control their own artificial intelligence infrastructure. At the same time, his calculations do not take into account China, which could become an additional source of growth if Nvidia resumes GPU shipments there.

In trading on September 8, Nvidia shares were up nearly 2% to $171 at the moment. The company's stock has slipped about 7% over the past month after its quarterly revenue from data centers was slightly below Wall Street's expectations. Market participants are also alarmed by the concentration of business: in the July quarter, nearly 40% of Nvidia's total revenue came from just two of its largest customers, CNBC emphasizes.

Since the beginning of 2025, Nvidia's market value is up more than 26%. By comparison, the main US stock index S&P 500 has added about 10% over the same period, while Broadcom has added almost 49%.

On Friday, September 5, analysts at two investment banks at once raised their target prices on Nvidia shares. New Street raised it from $200 to $235 (nearly 41% above the last close), and First Shanghai raised it from $170 to $215. Both reiterated a "buy" recommendation.

Wall Street's average consensus of $215 per paper suggests Nvidia's market value will rise another nearly 29% from its Sept. 5 close, according to MarketWatch data. The vast majority of analysts - 59 out of 66 - advise investors to buy the company's stock (Buy and Overweight ratings). Another six are neutral with a Hold rating and only one suggests selling (Sell).

This article was AI-translated and verified by a human editor