Nvidia Navigates Market Headwinds Amid AI Challenges and Competition

Nvidia (NVDA) investors have witnessed an atypical start to 2023, with shares declining by 3.3% year-to-date. This underperformance relative to major US indices has sparked concerns among analysts.

Factors Driving Weakness

EvercoreISI analyst Mark Lipacis has identified three primary reasons for Nvidia's recent weakness:

1. DeepSeek's AI model, RI, which offers ChatGPT-like performance at a lower cost, reducing demand for specialized AI chips from Nvidia.
2. DeepSeek's model shifts AI compute cycles away from Nvidia GPUs towards application-specific integrated circuits (ASICs).
3. Delays in the launch of Nvidia's Blackwell chip.

Analyst Sentiment Remains Bullish

Despite these concerns, Lipacis maintains a "Buy" rating and a $190 price target for Nvidia. He believes the company's robust software ecosystem and extensive developer community provide a significant competitive advantage in the AI space.

Competitive Landscape

The AI market has become increasingly competitive, with Amazon (AMZN) and Broadcom (AVGO) announcing major investments in AI chips. Additionally, Google (GOOG) has released a supercomputer with a custom AI chip called Willow.

Market Upside Potential

Analysts remain optimistic about Nvidia's long-term prospects. Bank of America's Vivek Arya has reiterated the chipmaker as his top pick for 2025, with a price target of $190, implying a potential upside of 57% from current levels.

Arya anticipates Nvidia will address concerns regarding Blackwell execution and provide positive guidance for fiscal year 2026, leading to an uptick in investor sentiment. Additionally, the company's upcoming GTC Conf. on March 17th is expected to showcase its strong pipeline and advancements in robotics and physical AI.

Financial Consensus

Market consensus on Nvidia's financial performance has not yet fully factored in recent sector concerns. Data from Yahoo Finance indicates that Nvidia's EPS estimates for 2025 and 2026 have received multiple upward revisions in the past 30 days.