Nvidia shares fell nearly 2% in morning trading.
The analyst cites valuation for the downgrade, with the shares trading at 55 times his 2024 numbers.
He would have to lift the multiple to 67x to justify Outperform, suggesting Nvidia valued at ~7X its stated 2024 TAM and ~25X sales. Conversely, he would have to double his sales growth assumptions (from ~20% to ~40%) over the next couple of years to continue to use a 40X multiple to value Nvidia.
However, Bryson believes the combination of "unprecedented demand" for both data center and client offerings will allow Nvidia to exceed expectations again next week when its reports.
Nvidia's continued work in building out its AI software will further solidify its AI leadership.
Client GPUs have again become difficult to source, helped by a combination of solid gaming demand and crypto mining requirements.
New opportunities, particularly the Metaverse and its graphics-intensive requirements, have started to realize the increased investment.
He sees no "negative catalyst" for the stock and improving fundamentals for Nvidia but downgrades the shares on valuation.
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