New Street Research analyst Pierre Ferragu stated that NVIDIA’s rapid rise since early last year has reached a point where further upward potential is limited. Consequently, he downgraded the stock from “buy” to “neutral” and set a one-year target price of $135 per share. If Ferragu’s analysis holds true, could this lead to a collapse in Bitcoin?
In the midst of the AI boom, led by Huang Renxun, NVIDIA’s stock has surged over 161.22% this year, pushing its market value past $3.1 trillion, surpassing Apple and Microsoft to become the world’s most valuable company. This has also driven impressive performances in Taiwan’s stock market, with the Taiwan Weighted Index reaching a new high of 23,556.59 points this week, and TSMC surpassing the thousand-dollar mark.
New Street Downgrades NVIDIA
However, at this juncture, New Street Research analyst Pierre Ferragu has downgraded NVIDIA from “buy” to “neutral.” Ferragu noted that the stock surged nearly 240% in 2023 and another 154% this year, reaching “full valuation.” He believes NVIDIA’s rapid rise since early last year has now plateaued.
Ferragu pointed out that the only potential upside exists in a bull market scenario, with significantly improved prospects post-2025, but confidence in this remains insufficient at present. He further emphasized that while NVIDIA’s brand quality remains unchanged, its brand valuation may face downside risks if current market conditions do not improve.
Despite Ferragu’s downgrade standing somewhat alone, Bloomberg data indicates that nearly 90% of analysts still recommend buying NVIDIA stock. Nonetheless, NVIDIA’s current trading price represents over 22 times expected earnings in the next 12 months, making it the most expensive stock in the S&P 500, thus drawing frequent valuation concerns.
New Street Research ultimately set NVIDIA’s one-year target price at $135 per share, 4% below its historical high of $140.76 but 7.3% higher than last Friday’s closing price of $125.83.
Could This Lead to a Bitcoin Collapse?
Coindesk has reported concerns among market experts about the highly synchronized volatility between Bitcoin and NVIDIA in recent years. Experts suggest that if the AI bubble bursts, it could drag down the cryptocurrency market.
From March 15, Bitcoin rose by 60% while NVIDIA rose by 77.5%. Their 90-day correlation reached 0.86, the highest since May 2023, indicating a strong synchronization in their fluctuations. A correlation above 0.8 suggests that Bitcoin and NVIDIA tend to move in sync. Therefore, if NVIDIA’s stock price starts to plummet, there is a high probability that Bitcoin would also decline in tandem.
However, these data are from before March this year. Since then, NVIDIA has continued to hit new highs while Bitcoin has stalled and retraced over 26% from its peak amid negative news such as German government regulations and Mt.Gox repayments. Their correlation has diminished significantly since.
Nevertheless, if NVIDIA were to experience a significant decline, it is anticipated that in a scenario of limited hot money, Bitcoin and even global risk assets could suffer as a result.
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