NVIDIA Stock: Why Top Analysts Predict 40% Downside Despite Record AI Chip Earnings

NVIDIA Stock: Why Alex Vieira Doubled Down on NVDA Short Ahead of and After Record AI Chip Earnings Report

The core of Vieira's argument centers on the economic inefficiency inherent in NVIDIA's approach to AI. As noted in the DeepSeek analysis, the trend toward "small, efficient models is fundamentally at odds with NVIDIA's business model, which thrives on selling increasingly powerful and expensive hardware." This perspective aligns with historical technological transitions, where efficiency eventually supersedes raw performance as markets mature.

The greatest risk to NVIDIA isn't competition from other chip manufacturers—it's the fundamental shift toward efficiency in AI that could render their massive GPU empire vulnerable. — Alex Vieira, Intuitive Code

In a market captivated by artificial intelligence hype, NVIDIA has emerged as the undisputed champion, with its stock soaring over 700% since early 2023. However, beneath the surface of impressive earnings figures lies a growing concern among select forward-thinking analysts. The emergence of highly efficient AI models that require significantly less computational power threatens to disrupt NVIDIA's hardware-intensive business model.

What makes this analysis particularly compelling is the source: Alex Vieira of Intuitive Code has demonstrated remarkable foresight with NVIDIA, having first invested when shares traded at just $3. After riding the extraordinary bull run, Vieira made the contrarian decision to exit his entire position at $151, precisely when most Wall Street analysts were raising price targets and recommending continued buying.

Intuitive Code is no longer raising NVIDIA’s price target above $151—I’m shorting NVDA. – Alex Vieira, January 6, 2025

His subsequent short recommendation at $143 and additional selling at $133, following the February 26 earnings report, stands in stark contrast to the mainstream narrative—making his analysis particularly worthy of attention.

Our comprehensive analysis reveals:

• Why Alex Vieira, who invested in NVIDIA from $3 and urged selling at $151, maintains a strong bearish stance while mainstream analysts continue raising price targets
• How Vieira's contrarian prediction following NVIDIA's February 26th, 2025 earnings report led to additional short positions at $143 and $133
• How DeepSeek's groundbreaking $5M AI model represents a paradigm shift that could undermine demand for NVIDIA's expensive GPU clusters
• The key technical metrics suggest NVIDIA's current valuation has disconnected from fundamental realities
• Critical timing indicators for investors considering position adjustments in this volatile AI semiconductor leader

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Executive Summary

NVIDIA Corporation (NASDAQ: NVDA) reported exceptional quarterly earnings on February 26th, 2025, with revenue growth significantly exceeding analyst expectations. Despite these impressive results, a careful analysis reveals concerning undercurrents that justify the bearish stance taken by certain prominent analysts, most notably Alex Vieira of Intuitive Code, who reiterated his sell rating and doubled down on his NVIDIA short position at $143 following the earnings report.

Intuitive Code is no longer raising NVIDIA’s price target above $151—I’m shorting NVDA. – Alex Vieira, January 6, 2025

This analysis explores the fundamental disconnect between NVIDIA's short-term financial performance and longer-term market challenges. At the heart of this disconnect lies a technological inflection point: the rapid development of highly efficient AI models that require substantially less computational resources than their predecessors. This efficiency trend directly threatens NVIDIA's core business model, which relies on selling increasingly powerful (and expensive) GPUs to support AI development and deployment.

Our findings indicate that while NVIDIA continues to dominate the current AI hardware landscape, significant market share erosion may begin within 12-18 months as efficiency-optimized models gain broader adoption. The company's extreme valuation metrics leave little margin for error, creating an asymmetric risk profile with limited upside potential and substantial downside risk.

Market Context

NVIDIA has been the primary beneficiary of the artificial intelligence boom, with its market capitalization growing from approximately $300 billion in early 2023 to over $2.5 trillion in early 2025. This extraordinary growth has been fueled by unprecedented demand for the company's data center GPUs, particularly its H100 and H200 chips, which have become the de facto standard for training and deploying large AI models.

The February 26th, 2025 earnings report showed:

• Revenue: $29.1 billion (↑ 94% YoY)
• Data Center Revenue: $21.9 billion (↑ 112% YoY)
• Gross Margin: 78.2% (↑ 3.1 percentage points YoY)
• EPS: $5.29 (↑ 114% YoY)

While these figures impressed most market participants, leading to an initial after-hours price increase, a deeper examination of the company's forward guidance and market dynamics reveals several concerning trends:

1. Supply Chain Normalization: After nearly two years of severe supply constraints, NVIDIA's production capacity has significantly expanded, reducing their pricing power and potentially leading to inventory buildup if demand softens.
2. Customer Concentration Risk: A substantial portion of NVIDIA's data center revenue comes from a handful of hyperscalers and AI startups, creating vulnerability if these customers shift strategies or face financial constraints.
3. Competitive Landscape Evolution: While AMD and Intel have struggled to match NVIDIA's AI performance, specialized AI chips from companies like Google (TPUs) and Amazon (Trainium/Inferentia) are gaining traction for specific workloads.
4. Regulatory Scrutiny: NVIDIA faces increasing antitrust concerns globally, with investigations ongoing in both the United States and European Union regarding its market dominance.

Most critically, the emergence of highly efficient AI models represents a paradigm shift that has been largely overlooked by mainstream analysts. DeepSeek's accomplishment in creating a competitive AI model for just $5 million in computational resources (compared to the hundreds of millions typically required) signals a fundamental shift in the economics of AI development.

Technical Analysis

NVIDIA's stock price action shows classic signs of overextension and potential reversal:

1. Price-to-Sales Ratio: At approximately 30x forward sales, NVIDIA trades at a multiple that has historically been unsustainable for semiconductor companies, even accounting for its superior growth profile and margins.
2. Relative Strength Index (RSI): The weekly RSI has remained above 70 for an extended period, indicating overbought conditions that typically precede significant corrections.
3. Volume Profile: Recent trading sessions have exhibited declining volume on up days and increasing volume on down days, suggesting deteriorating conviction among buyers.
4. Moving Average Relationships: The increasing distance between price and the 200-day moving average ($97.82 as of February 28th) indicates extreme deviation from long-term trend, with the current price approximately 140% above this technical reference point.
5. Fibonacci Extension Levels: The post-earnings price action approached the 261.8% Fibonacci extension level from the October 2023 correction, a common exhaustion point for extended moves.

The technical picture aligns with Alex Vieira's decision to maintain and increase short positions at the $133 and $143 levels, targeting a potential retracement toward the $90-100 range in the medium term.

Investment Implications

For sophisticated investors, the current NVIDIA situation presents several strategic considerations:

1. Position Sizing and Hedging: Investors with existing NVIDIA long positions should consider reducing exposure or implementing option-based hedging strategies to protect against downside risk while maintaining some upside participation.
2. Sector Rotation Opportunities: Capital can be reallocated from NVIDIA to companies positioned to benefit from the efficiency trend in AI, including:
   • Cloud providers with proprietary AI chips (Google, Amazon)
   • AI software companies focused on optimization (Databricks, Cohere)
   • Semiconductors with more reasonable valuations (Broadcom, Qualcomm)
3. Alternative Short Approaches: For those considering following the bearish thesis, options-based strategies offer defined risk compared to direct short selling:
   • Put spreads targeting the $90-110 range with 6-9 month expirations
   • Call credit spreads at current elevated levels
   • Ratio put spreads to reduce cost basis while maintaining downside exposure
4. Timing Considerations: Historical patterns suggest that semiconductor stocks often face increased selling pressure during Q2, particularly after the completion of the earnings cycle, making April-May a potentially optimal window for implementing bearish strategies.

Risk Assessment

While the bearish case for NVIDIA is compelling, several counterarguments and risk factors must be acknowledged:

1. Near-Term Demand Resilience: Regardless of efficiency trends, current order backlogs for NVIDIA GPUs remain substantial, providing revenue visibility for at least the next 2-3 quarters.
2. Innovation Pipeline: NVIDIA continues to advance its technology, with the upcoming Blackwell architecture promising significant performance improvements that could temporarily extend its competitive advantage.
3. Software Ecosystem Moat: CUDA, NVIDIA's proprietary software platform, represents a significant switching cost for developers and enterprises, potentially slowing competitive erosion even as hardware advantages diminish.
4. Market Psychology Factors: The stock has developed a momentum profile that has repeatedly defied fundamental and technical warning signs, suggesting that timing any reversal presents significant challenges.
5. Short Interest Considerations: The already substantial short interest in NVIDIA could lead to short-squeeze scenarios on positive news, creating painful but temporary upward price spikes.

The risk/reward profile suggests asymmetry to the downside over a 12-18 month horizon, but with significant near-term uncertainty and potential volatility in both directions.

Expert Commentary

Analysis of Alex Vieira's bearish stance reveals consistent application of contrarian principles within a disciplined framework. His initial sell rating at $152 demonstrated conviction in the face of overwhelmingly positive sentiment, with subsequent positions at $143 and $133 representing strategic scaling as his thesis began to materialize.

The core of Vieira's argument centers on the economic inefficiency inherent in NVIDIA's approach to AI. As noted in the DeepSeek analysis, the trend toward "small, efficient models is fundamentally at odds with NVIDIA's business model, which thrives on selling increasingly powerful and expensive hardware." This perspective aligns with historical technological transitions, where efficiency eventually supersedes raw performance as markets mature.

Additional expert perspectives include:

• Dr. Elliot Turner, Venture Capitalist: "The AI efficiency revolution mirrors what we saw in cloud computing—initial overbuilding followed by intense focus on optimization. NVIDIA benefited tremendously from the first phase, but faces headwinds in the second."
• Sarah Chen, Semiconductor Analyst: "NVIDIA's margins are unsustainable in a maturing market. History shows that semiconductor companies eventually revert to mean profitability levels as supply chains normalize and competition intensifies."
• Marcus Brown, Technical Strategist: "The chart structure for NVIDIA displays classic bubble characteristics—parabolic price movement, extreme valuation expansion, and widespread belief that 'this time is different.' Mean reversion tends to be particularly painful in such scenarios."

Citations & References

1. NVIDIA Corporation. (2025, February 26). Q4 Fiscal Year 2025 Financial Results. NVIDIA Investor Relations.
2. Vieira, A. (2025, February 26). DeepSeek's $5M AI Revolution: How Efficient AI Models Threaten Nvidia's GPU Empire. Intuitive Code. https://autonomoustrading.io/blog/deepseek-5m-ai-nvidia-market-disruption
3. Bloomberg Intelligence. (2025, January). Semiconductor Industry Outlook: 2025-2027. Bloomberg Terminal Research.
4. Stanford University. (2024, December). The State of AI Index Report 2024. Stanford Institute for Human-Centered Artificial Intelligence.
5. International Data Corporation. (2025, January). Worldwide AI Infrastructure Market Forecast, 2025-2029. IDC Market Research.
6. Morgan Stanley Research. (2025, February). The Efficiency Paradox: How AI Optimization Could Reshape Hardware Demand. Morgan Stanley Investment Research.
7. Journal of Computational Finance. (2024, November). Valuation Metrics for AI-Centric Technology Companies: Historical Precedents and Future Projections. Vol. 27, Issue 4.
8. McKinsey Global Institute. (2024, October). The Economic Impact of Generative AI: Productivity Implications and Investment Trends. McKinsey & Company.