Nvidia (NASDAQ: NVDA) has established itself as a leader in the AI revolution, controlling nearly 90% of the data center market with its exclusive CUDA software, which gives it a competitive advantage over other chip manufacturers, Tip Ranks reports.
However, some analysts and investors are cautioning that Nvidia’s rapid growth may face challenges in the near future.
One prominent investor, operating under the pseudonym Nexus Research, has raised concerns about the potential risks to Nvidia’s dominance. Nexus Research, ranked in the top 3% of analysts on TipRanks, points out that several of Nvidia’s biggest customers, suppliers, and competitors are collaborating to develop an open-source alternative to CUDA. Historical examples, such as Linux and Android, demonstrate how open-source platforms have disrupted industries by offering cheaper and more adaptable technologies.
“Open-source development allows for complete code transparency, enabling faster innovation and customization,” Nexus Research noted.
They suggested that this could eventually undermine Nvidia’s hold on the market. Meanwhile, Nvidia’s continued investment in research and development to maintain its lead could impact profit margins, especially as rival chipmakers make gains.
Nexus Research also highlighted potential issues such as Nvidia’s reliance on a small group of large customers, the possible slowing of AI adoption, and the threat of a US Department of Justice antitrust investigation. Combined with slower revenue growth and increased competition, these factors could lead to a decline in Nvidia’s stock value.
While the investor has downgraded Nvidia’s stock to Hold (Neutral), they have not sold off their shares, citing the company’s strengths beyond CUDA and the time it will take for alternative platforms to catch up.
Despite these warnings, Wall Street remains largely bullish on Nvidia. With 39 Buy ratings and just 3 Hold ratings, the stock continues to be viewed as a Strong Buy, and analysts predict a potential 23% upside with a 12-month price target of $152.44.
For now, Nvidia’s dominance in the AI sector remains intact, but growing risks may challenge the company in the long term.
