Here’s why this veteran trader is cautious on Nvidia going into the new year.
Transcript:
CONWAY GITTENS: I know you love NVIDIA. The shares have tripled in value in 2024. I’m wondering when you look at the outlook for 2025, what will you be looking at to make sure that your investment is safe?
STEPHEN ‘SARGE’ GUILFOYLE: Well, actually, to be a good thing. You caught me because I just wrote an article where I’m becoming more cautious on NVIDIA. I expect their margins to remain fantastic. I expect their sales to remain fantastic, but that sales growth is going to decelerate right now. Technically there’s some geopolitical issues. Technically the stock is going through a little bit of a trouble. It’s still on an upward trend. The trend hasn’t broken. But there is something of a triple top forming or a head and shoulders pattern more likely. And if it were to break to the downside right now it just lost the 21 day EMA. It just lost the 50 day SMA. If it were to break below, say 132, I think I would be forced to further lighten up my position. I think I would be forced to put NVIDIA on the back burner and focus on other stocks. I wouldn’t get out of it completely because Jensen Huang has taught us that he’s pretty much capable of anything, but it would not be one of my focus stocks at this moment.
CONWAY GITTENS: So you kind of mentioned these price levels. I’m wondering about the fundamentals that go along with those price levels, what’s going on that makes you a little bit concerned?
STEPHEN ‘SARGE’ GUILFOYLE: Well, I just the numbers have been so fantastic. And they’re going to be fantastic by anyone else’s standards. But the growth has been amazing. And it’s starting to decelerate the growth, not the sales the rate of growth is decelerating. And it’s going to further decelerate as the high end market. I wouldn’t say it becomes saturated for AI chips, but as companies like AMD and Marvell Technology start to catch up and take even just a little bit of market share. And as the haves and have nots separate, as far as being able to sell AI to the public or to their business customers at the next level, it’s only natural that this sales growth, which has been exponential for a while now, Will, I believe, slow down. It’s already slowing down, but it will slow down further going through 2025.
CONWAY GITTENS: So one of the things that could be a negative headwind for NVIDIA is the fact that it sells to China represented like 17% of its revenue in the year end to January. So how might the potential us-china trade tensions, including talk of Trump’s tariff plan impact NVIDIA?
STEPHEN ‘SARGE’ GUILFOYLE: Well, it’s certainly it’s certainly an issue. I mean, we know that President-elect Trump has he has invited President Xi of China to his inaugural event, which is unusual. But I know they want to try to get things off on the right foot. But let’s face it, we’re competitors. And as a designer who sells, like you said, 17% of their revenues they derive from China or Chinese customers. It’s definitely an issue. And I think you and I both know that if Chinese semiconductor manufacturers or designers can create a chip that can compete on the level of NVIDIA, well, then they’re no longer going to import those chips and they’re no longer going to buy from American designers. And the same thing goes for the number two designer of artificial intelligence chips here in the US, which is Advanced Micro. Another name I have a long position in, because they also derive a similar portion of their sales from China. So this is a risk to the US, to the high end, to the elite end US semiconductor designers.
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