Key Takeaways
- Baird downgraded Nvidia to Neutral from Outperform and cut its price target to $200 from $500, six days before its Nov. 17 earnings report.
- Baird is worried about Jensen Huang and the investigations around him, and it expects AI spending growth to slow in 2027.
- Analysts still expect Nvidia’s earnings per share to rise 71% in the fiscal year ending January 2028, and management has guided for revenue growth of about 70%.
- At 14x forward earnings, against a five-year average of 36x, the stock already prices in much of the slowdown Baird is worried about.
Baird downgraded Nvidia (NVDA) to Neutral from Outperform on Wednesday, Nov. 11, and cut its price target to $200 from $500. Analyst Tristan Gerra titled his note “Icarus’ Rise and Fall; Company Will be Fine.”
The timing stings: Nvidia reports after the close on Nov. 17. Most attention is on the Huang scandal, but the part of Baird’s note that matters most is its bet that AI spending slows next year.
Baird Has Three Worries About Nvidia
- Huang: Gerra cited uncertainty over Huang’s tenure into 2027. Huang admitted to an affair on Sunday, Nov. 8, and Nvidia’s board opened an independent investigation into reports that he was the target of a foreign intelligence effort. The board said it has no reason to believe national security or Nvidia’s secrets were compromised.
- China: Gerra expects a new ban on H200 exports to China, with some chips already in Asian warehouses awaiting Chinese orders. “We estimate this could translate into a $5B write down,” he wrote.
- Spending: Baird sees the big cloud companies’ AI spending growing 40% or less in 2027, and it cut its estimates for 2028 and later years.
The first two could clear up within weeks. The third is about how much Nvidia sells next year.
Nvidia Already Has Next Year Lined Up
On its August call, Nvidia guided for fiscal 2028 revenue to grow about 70%, and said supply is what holds that figure back. Analysts sit close behind, at $692 billion of fiscal 2028 revenue, up 68% from this year’s $412 billion:
Analysts expect normalized EPS to rise from $9.32 this fiscal year to $15.93 in fiscal 2028, and to $21.41 the year after. The fiscal 2028 figure was $12.84 three months ago, before Nvidia gave its 70% outlook:
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At 14x, the Slowdown Looks Priced Into Nvidia Stock
On the next 12 months’ expected earnings, Nvidia traded at 14x at Tuesday’s close, the lowest in five years and far below its 36x average:
NewEdge Wealth’s Cameron Dawson told Bloomberg Surveillance on Nov. 10 that the market sees “a higher probability that 27 or early 28 is the peak for semiconductor earnings.”
Baird’s $200 still sits about 18% above Tuesday’s close. Nvidia’s Nov. 5 close implied only about 16% annual free-cash-flow growth for 10 years, and the stock is lower now.
Baird is right that the Huang investigation and Washington could weigh on the stock for weeks. But downgrading Nvidia at 14x forward earnings over slower 2027 spending is late. The market priced in a peak before Baird did, while the estimates kept rising.
What Nvidia Needs to Show on Nov. 17
Watch whether management sticks with about 70% growth for fiscal 2028, and where it guides gross margin after calling for a 71% to 72% bottom in the January quarter. If the board’s findings cost Nvidia its CEO, all bets are off.
So What Is Nvidia Stock Actually Worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
