HSBC is taking a more cautious stance on Nvidia, a leading name in artificial intelligence. Analyst Frank Lee recently adjusted his view on the chipmaker’s stock, shifting it from a “buy” to a “hold.” He also lowered his price target by $55, bringing it down to $120. As of Wednesday’s closing, this new target suggests a modest upside of just over 8%.
In a note released Thursday, Lee shared his expectations for Nvidia’s financial performance. He predicts a sales growth of 62% year-over-year and an earnings per share (EPS) increase of 58% for fiscal year 2026. With the current price-to-earnings ratio standing at 23 times earnings, Lee believes this isn’t demanding. However, he cautions that the potential for significant earnings surprises is becoming limited. Over the next couple of years, Nvidia might face challenges that the market hasn’t fully considered yet, potentially slowing its momentum.
Throughout 2025, the stock has faced considerable pressure, in part due to advancements by Chinese AI startup DeepSeek earlier this year. Nvidia’s shares have dropped more than 27% in the past three months and about 8% over the past month, falling behind the broader market’s performance.
Lee notes that Nvidia might struggle to maintain its pricing power for its graphics processing units (GPUs), which could affect the company’s earnings growth. He also foresees “limited spec migration” with the upcoming release of the Vera Rubin GPUs, expected in 2026.
Back in April 2023, Lee had upgraded Nvidia to a “buy,” seeing underestimated potential in its AI GPU pricing and product lineup. But now, he observes a slowing in Nvidia’s GPU pricing power, with no noticeable increase in average selling prices between the B200 and B300 GPUs or the GB200 and GB300 NVL72 rack systems.
Lee is also mindful of other possible challenges, such as a long-term dip in demand due to DeepSeek’s influence and disruptions in Nvidia’s supply chain.
Lee’s cautious outlook is a minority view among Wall Street analysts. According to LSEG data, he is one of only five analysts with a hold rating on Nvidia out of 64 covering the stock. The majority, 59 analysts, still recommend “buy” or “strong buy.” Nvidia’s average target price stands at nearly $173, suggesting a potential upside of over 56% from its current position. On Thursday, Nvidia shares slipped 6%, echoing a downturn in semiconductor stocks after President Donald Trump announced new reciprocal tariffs the previous day.
