Nvidia's Customers Are Quietly Building Alternatives

Hunting Alphas7.83K FollowersFollow5ShareSavePlay(7min)Comment(1)SummaryNvidia’s largest cloud customers are accelerating in-house chip efforts, increasing long-term substitution risk despite today’s exceptional AI demand visibility.Automotive revenue growth is already slowing as OEMs explore cheaper Chinese alternatives, hinting at how pricing pressure could eventually migrate to Nvidia’s core segments.Management now sees a one trillion dollar Blackwell and Rubin demand pipeline, reinforcing expectations for unusually strong revenue growth over the next several years.Street estimates for Nvidia’s revenue and earnings have been revised sharply higher, yet the stock trades at a modest valuation discount versus its historical premium to peers.Technicals show a bearish engulfing pattern on the weekly chart, implying roughly 5 percent near-term downside before the next potential consolidation zone.

Marvin Samuel Tolentino Pineda/iStock Editorial via Getty Images Performance assessment Since my last update on Nvidia stock (NVDA), the performance of NVDA has been slightly worse than the broader market index: Thesis I continue to maintain a balanced viewThis article was written byHunting Alphas7.83K FollowersFollowI aim to provide alpha-generating investment ideas. I am an independent investor managing my family's portfolio, primarily via a Self Managed Super Fund. My articles deliver 5-Minute Pitches focused on the core fundamental and technical drivers of the security.I have a generalist approach as I explore, analyze and invest in any sector so long there is perceived alpha potential vs the S&P500. The typical holding period ranges between a few months to multiple years.I am very much focused on adding value via alpha generation. I always start with a Performance Assessment section for each follow-up article. I publish unusually detailed analytics on my long-only, zero-leverage global equity portfolio performance on my Hunting Alphas website every month.A bit about how I approach research and coverage of a stock:I build and maintain spreadsheets showing historical data on the financials, key metric disclosures, data on the guidance and surprise trends vs consensus estimates, time-series values of the valuations vs peers, data on key coincident or leading indicators of performance and other monitorables. In addition to the company's filings, I also keep tabs on relevant industry news and reports plus other people's coverage of the stock. In some cases, such as during times of a CEO change, I will do a deep dive on a key leader's background and his/her past performance record.I very rarely build DCFs and project financials many years out into the future as I don't think it adds much value. Instead, I find it more useful to assess how a company has delivered and the broad outlook on the 5 key drivers of a DCF valuation: revenues, costs and margins, cash flow conversion, capex and investments and the interest rates (which affect the discount rate/opportunity cost of capital). In some cases, especially for companies trading at very high multiples on a TTM or 1-yr fwd basis, I do a reverse DCF to make sense of the implied growth CAGR implications.Note: Hunting Alphas is related to VishValue Research on Seeking Alpha.Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.