HSBC's latest report suggests that NVIDIA (NVDA, Financial), a key stock in the artificial intelligence sector, may have limited potential for future price increases. The bank downgraded NVIDIA from a "buy" to a "hold" and reduced its target price by $55 to $120. This new target offers an upside potential of just over 8% compared to the recent closing price.
HSBC analyst Frank Lee forecasts that NVIDIA's sales will grow by 62% year-over-year in the fiscal year 2026, with earnings per share increasing by 58%. Although the projected price-to-earnings ratio for fiscal year 2026 is 23, which is not exceptionally high, Lee believes that the company's earnings growth potential over the next one to two years is limited.
He also noted that NVIDIA's pricing power for its graphics processing units (GPUs) might decline. The analyst doesn’t see a significant average selling price increase between NVIDIA's B200 and B300 GPUs or the GB200 and GB300 NVL72 architectures, which could restrict the company's profitability.
