Why this veteran trader is cautious about Nvidia in 2025

Stephen ‘Sarge’ Guilfoyle, contributor for TheStreet Pro, explains why he's cautious about Nvidia in the new year.

Transcript

00:00I know you love NVIDIA. The shares have tripled in value in 2024. I'm wondering when you look at

00:08the outlook for 2025, what will you be looking at to make sure that your investment is safe?

00:17Well, actually, it's a good thing you caught me because I just wrote an article where I'm

00:22becoming more cautious on NVIDIA. So I expect their margins to remain fantastic. I expect

00:28their sales to remain fantastic. But that sales growth is going to decelerate.

00:33Right now, technically, there's some geopolitical issues. Technically, the stock is going through

00:39a little bit of trouble. It's still an upward trend. The trend hasn't broken, but there is

00:44something of a triple top forming or a head and shoulders pattern, more likely. And if it were

00:50to break to the downside right now, it just lost a 21-day EMA. It just lost a 50-day SMA. If it

00:55were to break below, say, 132, I think I would be forced to further lighten up my position. I think

01:02I would be forced to put NVIDIA on the back burner and focus on other stocks. I wouldn't get out of

01:07it completely because Yen Sen Wang has taught us that he's pretty much capable of anything,

01:12but it would not be one of my focus stocks at this moment.

01:16So you kind of mentioned these price levels. I'm wondering about the fundamentals that go

01:21along with those price levels. What's going on that makes you a little bit concerned?

01:27Well, the numbers have been so fantastic, and they're going to be fantastic by anyone else's

01:33standards. But the growth has been amazing, and it's starting to decelerate. The growth,

01:38not the sales. The rate of growth is decelerating, and it's going to further

01:42decelerate. As the high-end market, I wouldn't say it becomes saturated for AI chips, but as

01:49companies like AMD and Marvell Technology start to catch up, it takes even just a little bit of

01:55market share. And as the haves and have nots separate as far as being able to sell AI to

02:03the public or to their business customers at the next level, it's only natural that this sales

02:09growth, which has been exponential for a while now, will, I believe, slow down. It's already

02:15slowing down, but it will slow down further going through 2025. So one of the things that

02:21could be a negative headwind for Nvidia is the fact that its sales to China represented like

02:2917% of its revenue in the year and to January. So how might the potential US-China trade tensions,

02:40including talk of Trump's terror plan, impact Nvidia?

02:46Oh, it's certainly an issue. I mean, we know that President-elect Trump has invited President Xi of

02:53China to his inaugural event, which is unusual, but I know they want to try to get things off

02:59on the right foot, but let's face it, we're competitors. And as a designer who sells,

03:05like you said, 17% of their revenues they derive from China or Chinese customers,

03:10it's definitely an issue. And I think you and I both know that if Chinese semiconductor

03:17manufacturers or designers can create a chip that can compete on the level of Nvidia, well,

03:22then they're no longer going to import those chips. They're no longer going to buy from

03:26American designers. And the same thing goes for the number two designer of artificial intelligence

03:30chips here in the US, which is Advanced Micro, another name I have a long position in,

03:34because they also derive a similar portion of their sales from China. So this is a risk to

03:40the US, to the high end, to the elite end US semiconductor designers.