It’s certainly not difficult to find folks who are super-bullish on Nvidia (NASDAQ:NVDA) as a purveyor of hardware for artificial intelligence (AI) applications. However, at least one well-known investor is signaling caution on NVDA stock, which appears to be over-hyped and overpriced.
As we’ll see, the investor I’m referring to is concerned about Nvidia and about the U.S. economy generally. So, before you load the boat with Nvidia shares, listen to what a famous market expert has to say. Then, consider waiting for a potential price pullback.
Overwhelmingly Positive Sentiment for NVDA Stock
Before I reveal the billionaire that seems to be leaning bearish on NVDA stock, I should mention another well-heeled whale that’s evidently bullish. Specifically, Stanley Druckenmiller’s hedge fund, Duquesne Family Office, increased its position in 2023’s first half from about 583,000 to 791,000 Nvidia shares.
Meanwhile, there are plenty of experts on Wall Street expressing positive sentiment about Nvidia. A typical example is Rosenblatt analyst Hans Mosemann, who claims that the “AI enthusiasm is not over-hyped.” Furthermore, Mosemann assures that the Nvidia share-price rally has “plenty of runway” and that Nvidia’s “recent sequential guide was telling.”
Possibly, Mosemann was referring to Nvidia’s current-quarter revenue guidance of $11 billion, “plus or minus 2%.” This implies substantial growth compared to the previous quarter’s $7.192 billion in revenue.
Of course, there’s no guarantee that Nvidia will actually achieve that result. Nevertheless, Wall Street remains strongly bullish on NVDA stock, with 30 out of 33 analysts issuing a “buy” or equivalent rating on the shares.
A Rare Cautionary Voice
Yet not everyone is hyped up about Nvidia or about AI in general. Reportedly, Omega Advisors founder and legendary billionaire Leon Cooperman warned that “Nvidia’s not going to end well” in a recent interview.
As you might have guessed, Cooperman’s point of contention is Nvidia’s valuation. As the billionaire put it, “[T]he fall from 200 times earnings is a lot harder than the fall from eight or nine times earnings.”
Perhaps Cooperman is rounding for simplicity’s sake, as Nvidia’s GAAP trailing-12-month price-to-earnings (P/E) ratio is 220.17x. For comparison, the sector median P/E ratio is 25.46x.
Cooperman isn’t only targeting NVDA stock, as he seems to be concerned about the equities market overall. “There’s a lot of crazy things going on in the market … I’ve never seen moves on such insignificant news as we’re seeing in the market today,” Cooperman observed.
I’m not positive that he’s specifically referring to the general hype surrounding AI. Yet, it wouldn’t surprise me if Cooperman has AI mania in mind. And I’ll admit, it’s alarming that so many technology company CEOs feel compelled to mention AI multiple times during conference calls this year.
NVDA Stock Needs to Cool Down Before It Moves Up
Previously, I recommended “being cautious with NVDA stock and waiting for a 20% pullback before buying it.” Today, I’m sticking to that recommendation even if it’s not popular.
Nvidia still needs to meet its ambitious revenue-growth goal. Moreover, it feels like the market has already priced in a best-case scenario.
So, it’s important for prospective investors to heed Cooperman’s warning about NVDA stock. Just relax, and if Nvidia’s valuation drops to a more reasonable level, that’s the time to start building a share position.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
