4 Underappreciated Risks Facing Nvidia Bulls

Seeking Alpha01-12

SummaryHeavy reliance on a few mega-cap tech companies poses a significant risk to Nvidia Corporation sales should investors begin to demand capital discipline from these companies.The surge in Nvidia...

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Comments

我i168
01-13
我i168
Or bear shit?! 😂
MetaMonkey
01-13
MetaMonkey
It's bear shit! lol. This person writing this article has been paid by bears. Scandalous
Icywinddale
01-12
Icywinddale
Bull shit

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However, I see four underappreciated risks facing the company over the next 12 months. The first is that the decline in profitability of Nvidia's main customers causes a sharp stock price decline and a shift towards capital discipline. Second is the extreme rise in Nvidia's accounts receivable, which may act as a headwind to future sales growth. Third is the extreme levels of optimism among analysts and options markets regarding the stock's outlook. Fourth is the failure of the stock price to rise to new highs despite this widespread optimism. Taken together, I maintain my strong sell rating on the stock and remain short.1) Declining Profitability Of Nvidia's Main CustomersIt could well be the case that a large share of Nvidia's earnings will turn out to reflect malinvestment resulting from the excessive spending among mega-cap tech stocks that has been enabled by the surge in their share prices. It has been estimated that as much as half of Nvidia's sales come from just four companies, namely Microsoft (MSFT), Meta Platforms (META) Amazon (AMZN), and Alphabet (GOOGL), while Tesla (TSLA) is also thought to be a significant customer. This may appear to be a positive thing, as these companies on the whole are highly stable and growing strongly. However, this level of concentration is troubling for several reasons.One risk that has been well documented is that the major cloud computing customers reduce their reliance on Nvidia's chips via their own in-house AI chip development efforts. However, a less well-documented risk comes from a potential collapse in AI industry capex if the valuation bubble in mega-cap tech stocks bursts, leading to a shift towards capital discipline.Over the past year, MSFT, META, GOOGL, AMZN, and TSLA have spent over $200bn in capex, equivalent to 20% of the entire S&P500. If it is true that 50% of Nvidia's sales are to these companies, this means that almost one-third of the capex from these companies has found its way into Nvidia's coffers.Chart of Mag 7 CapexBloombergThis huge investment spending has been enabled by the relentless appetite among investors for these stocks, sending a signal to management to continue full steam ahead despite there being little to show for these investments in terms of monetization. Moreover, stock-based compensation, or SBC, for these five companies amounted to $75bn over the same period, equivalent to 36% of the entire S&P500 SBC. While stock-based compensation among these companies is of no benefit to Nvidia directly, their ability to offer expensive stock as compensation to employees has allowed them to ramp up AI training expenditure. Taken together, the combined value of capex and SBC among these five stocks has amounted to 19% of total sales over the past year. As a result, free cash flows excluding stock-based compensation for the group have actually declined over the past two quarters.Chart of Mag 7 Cash flowsBloombergThe problem now is that these five stocks collectively trade at over 60x free cash flow ex-stock-based compensation, resulting in a free cash flow yield of around 1.5%. Meanwhile, 30-year inflation-linked bonds offer a yield of 2.6%. Such negative risk premiums have not been seen since the height of the late-1990s stock bubble, and strongly suggest that the current bubble is in its final stages. Any decline in the price of these five stocks could trigger a shift in priorities among management teams in favor of capital discipline. That could make it much more expensive for them to dish out stock-based compensation to employees to train AI models.2) Surging Accounts Receivable Is A Headwind For SalesAn additional risk to Nvidia comes from the astonishing increase in accounts receivable, which increased by $9.4bn in the past four quarters. In the last quarter alone, the figure rose by $3.6bn. The sudden increase relative to sales stands out as being extreme when measured relative to the rest of the mega-cap universe, as shown in the chart below.Chart of Mega Cap Accounts ReceivableBloombergConsidering that around half of the companies' revenues come from highly stable mega-cap stocks, there is little risk that these reported earnings will not flow into the cash coffers. However, it does create a headwind for future sales, as its customers already owe the company significant amounts of cash.3) Sentiment, Positioning, And Wild Valuation ProjectionsThe price of 1-year call options on the stock exceeds the price of 1-year put options, which has only occurred a handful of times over the past decade, typically after a large stock price increase has already happened. As most investors use options as a hedge against a fall in the price of their stock holdings, the fact that it costs more to hedge against a large gain relative to a large drop indicated a large degree of speculative interest in the stock.Chart of NVDA Option VolatilityPrice of 1-Year NVDA Implied Call Option Volatility Vs Put Option Volatility (Bloomberg)Wall Street is also extremely bullish on the stock, with zero analysts giving it a sell rating. Meanwhile, the 12-month price target is fully 23% above current levels and 17% above its all-time high. We have also seen a proliferation of analyses calling for Nvidia to reach staggering valuations as high as $10tn, often justified by its low PEG (price-to-earnings-to-growth) ratio, such as this article. The author argues that Nvidia is a bargain due to expected earnings growth being higher than its forward P/E ratio. Leaving aside the fact that this double counts the rapid earnings growth expected in 2025, the PEG ratio is an extremely flawed valuation metric. It fails to consider the inevitable slowdown in growth that results once a company's earnings reach a significant share of the economy. It is the kind of metric that is brought out to justify paying extreme multiples for a stock.Table of PEG RatiosBarrons4) Concerning Chart PatternDespite the widespread optimism towards Nvidia's stock, its price has failed to break out into new highs, and the large downside reversal candle seen on January 7 hints at a potential reversal pattern. The stock is now no higher than it was at its June peak when I last highlighted the extreme nature of its valuation multiples. Given the widespread bullish positioning in options markets, downside momentum could gather on any further weakness as options traders and margin-funded long positions are forced to reverse their bets.Chart of NVDANVDA Stock Price (Bloomberg)SummaryNvidia bulls face several significant risks over the coming quarters, including the declining profitability of their main customers, surging accounts receivable, excessive optimism around the stock, and a deterioration in the price chart. A significant decline in the stock seems highly likely in 2025.","kind":"news","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[{"id":392040181489816,"gmtCreate":1736718800022,"gmtModify":1736732551178,"author":{"id":"3563873670221480","authorId":"3563873670221480","name":"我i168","avatar":"https://static.tigerbbs.com/34b2d0551b5ab028c13ab35747c4df8c","vip":1,"crmLevel":5,"crmLevelSwitch":1,"idStr":"3563873670221480","authorIdStr":"3563873670221480"},"htmlText":"Or bear shit?! 😂&nbsp;","listText":"Or bear shit?! 😂&nbsp;","text":"Or bear shit?! 😂","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/392040181489816","repostId":1162107727,"repostType":4,"repost":{"id":"1162107727","kind":"news","pubTimestamp":1736647249,"share":"https://ttm.financial/m/news/1162107727?lang=&edition=fundamental","pubTime":"2025-01-12 10:00","market":"us","language":"en","title":"4 Underappreciated Risks Facing Nvidia Bulls","url":"https://stock-news.laohu8.com/highlight/detail?id=1162107727","media":"Seeking Alpha","summary":"SummaryHeavy reliance on a few mega-cap tech companies poses a significant risk to Nvidia Corporation sales should investors begin to demand capital discipline from these companies.The surge in Nvidia","content":"<html><head></head><body><h2 id=\"id_1684018099\">Summary</h2><ul style=\"\"><li><p>Heavy reliance on a few mega-cap tech companies poses a significant risk to Nvidia Corporation sales should investors begin to demand capital discipline from these companies.</p></li><li><p>The surge in Nvidia&#39;s accounts receivable will act as a headwind to sales, as their customers already owe the company significant amounts of cash.</p></li><li><p>Widespread optimism among analysts and options traders poses a risk to valuation multiples should the bullish trend reverse.</p></li><li><p>The failure of the stock to reach new highs recently, combined with recent bearish price action, suggests a potential significant trend change could be afoot.</p></li></ul><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/6144f6f01bec9d39bca22c82ac595a7e\" alt=\"Nvidia Corporation building in Taipei, Taiwan.\" title=\"Nvidia Corporation building in Taipei, Taiwan.\" tg-width=\"750\" tg-height=\"500\"/><span>Nvidia Corporation building in Taipei, Taiwan.</span></p><p></p><p><strong>BING-JHEN HONG</strong></p><p></p><p>The bullish case for <strong>Nvidia Corporation</strong> (NASDAQ:NVDA) rests on the continuation of the company&#39;s blockbuster earnings growth, which many believe will allow the stock to grow into its elevated valuation multiples. However, I see four underappreciated risks facing the company over the next 12 months. The first is that the decline in profitability of Nvidia&#39;s main customers causes a sharp stock price decline and a shift towards capital discipline. Second is the extreme rise in Nvidia&#39;s accounts receivable, which may act as a headwind to future sales growth. Third is the extreme levels of optimism among analysts and options markets regarding the stock&#39;s outlook. Fourth is the failure of the stock price to rise to new highs despite this widespread optimism. Taken together, I maintain my strong sell rating on the stock and remain short.</p><h2 id=\"id_3090282346\">1) Declining Profitability Of Nvidia&#39;s Main Customers</h2><p>It could well be the case that a large share of Nvidia&#39;s earnings will turn out to reflect malinvestment resulting from the excessive spending among mega-cap tech stocks that has been enabled by the surge in their share prices. It has been estimated that as much as half of Nvidia&#39;s sales come from just four companies, namely Microsoft (MSFT), Meta Platforms (META) Amazon (AMZN), and Alphabet (GOOGL), while Tesla (TSLA) is also thought to be a significant customer. This may appear to be a positive thing, as these companies on the whole are highly stable and growing strongly. However, this level of concentration is troubling for several reasons.</p><p>One risk that has been well documented is that the major cloud computing customers reduce their reliance on Nvidia&#39;s chips via their own in-house AI chip development efforts. However, a less well-documented risk comes from a potential collapse in AI industry capex if the valuation bubble in mega-cap tech stocks bursts, leading to a shift towards capital discipline.</p><p>Over the past year, MSFT, META, GOOGL, AMZN, and TSLA have spent over $200bn in capex, equivalent to 20% of the entire S&amp;P500. If it is true that 50% of Nvidia&#39;s sales are to these companies, this means that almost one-third of the capex from these companies has found its way into Nvidia&#39;s coffers.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/25f238808ceeaa53ad53bbf8b3ac0497\" alt=\"Chart of Mag 7 Capex\" title=\"Chart of Mag 7 Capex\" tg-width=\"640\" tg-height=\"418\"/><span>Chart of Mag 7 Capex</span></p><p style=\"text-align: left;\"><strong>Bloomberg</strong></p><p></p><p>This huge investment spending has been enabled by the relentless appetite among investors for these stocks, sending a signal to management to continue full steam ahead despite there being little to show for these investments in terms of monetization. Moreover, stock-based compensation, or SBC, for these five companies amounted to $75bn over the same period, equivalent to 36% of the entire S&amp;P500 SBC. While stock-based compensation among these companies is of no benefit to Nvidia directly, their ability to offer expensive stock as compensation to employees has allowed them to ramp up AI training expenditure. Taken together, the combined value of capex and SBC among these five stocks has amounted to 19% of total sales over the past year. As a result, free cash flows excluding stock-based compensation for the group have actually declined over the past two quarters.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/756a69bc3fb19081b4586223420dd9fe\" alt=\"Chart of Mag 7 Cash flows\" title=\"Chart of Mag 7 Cash flows\" tg-width=\"640\" tg-height=\"418\"/><span>Chart of Mag 7 Cash flows</span></p><p style=\"text-align: left;\"><strong>Bloomberg</strong></p><p></p><p>The problem now is that these five stocks collectively trade at over 60x free cash flow ex-stock-based compensation, resulting in a free cash flow yield of around 1.5%. Meanwhile, 30-year inflation-linked bonds offer a yield of 2.6%. Such negative risk premiums have not been seen since the height of the late-1990s stock bubble, and strongly suggest that the current bubble is in its final stages. Any decline in the price of these five stocks could trigger a shift in priorities among management teams in favor of capital discipline. That could make it much more expensive for them to dish out stock-based compensation to employees to train AI models.</p><h2 id=\"id_2413479590\">2) Surging Accounts Receivable Is A Headwind For Sales</h2><p>An additional risk to Nvidia comes from the astonishing increase in accounts receivable, which increased by $9.4bn in the past four quarters. In the last quarter alone, the figure rose by $3.6bn. The sudden increase relative to sales stands out as being extreme when measured relative to the rest of the mega-cap universe, as shown in the chart below.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/bae2b98938d00814e2e1fdf7b61cee20\" alt=\"Chart of Mega Cap Accounts Receivable\" title=\"Chart of Mega Cap Accounts Receivable\" tg-width=\"640\" tg-height=\"445\"/><span>Chart of Mega Cap Accounts Receivable</span></p><p style=\"text-align: left;\"><strong>Bloomberg</strong></p><p></p><p>Considering that around half of the companies&#39; revenues come from highly stable mega-cap stocks, there is little risk that these reported earnings will not flow into the cash coffers. However, it does create a headwind for future sales, as its customers already owe the company significant amounts of cash.</p><h2 id=\"id_4278785936\">3) Sentiment, Positioning, And Wild Valuation Projections</h2><p>The price of 1-year call options on the stock exceeds the price of 1-year put options, which has only occurred a handful of times over the past decade, typically after a large stock price increase has already happened. As most investors use options as a hedge against a fall in the price of their stock holdings, the fact that it costs more to hedge against a large gain relative to a large drop indicated a large degree of speculative interest in the stock.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/f1b417dee9e02ccf920a94eeee0c6f89\" alt=\"Chart of NVDA Option Volatility\" title=\"Chart of NVDA Option Volatility\" tg-width=\"640\" tg-height=\"224\"/><span>Chart of NVDA Option Volatility</span></p><p style=\"text-align: left;\"><strong>Price of 1-Year NVDA Implied Call Option Volatility Vs Put Option Volatility (Bloomberg)</strong></p><p></p><p>Wall Street is also extremely bullish on the stock, with zero analysts giving it a sell rating. Meanwhile, the 12-month price target is fully 23% above current levels and 17% above its all-time high. We have also seen a proliferation of analyses calling for Nvidia to reach staggering valuations as high as $10tn, often justified by its low PEG (price-to-earnings-to-growth) ratio, such as this article. The author argues that Nvidia is a bargain due to expected earnings growth being higher than its forward P/E ratio. Leaving aside the fact that this double counts the rapid earnings growth expected in 2025, the PEG ratio is an extremely flawed valuation metric. It fails to consider the inevitable slowdown in growth that results once a company&#39;s earnings reach a significant share of the economy. It is the kind of metric that is brought out to justify paying extreme multiples for a stock.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/3da07b16243a12a5d8e85c36d6ffd820\" alt=\"Table of PEG Ratios\" title=\"Table of PEG Ratios\" tg-width=\"640\" tg-height=\"485\"/><span>Table of PEG Ratios</span></p><p style=\"text-align: left;\"><strong>Barrons</strong></p><p></p><h2 id=\"id_1548182104\">4) Concerning Chart Pattern</h2><p>Despite the widespread optimism towards Nvidia&#39;s stock, its price has failed to break out into new highs, and the large downside reversal candle seen on January 7 hints at a potential reversal pattern. The stock is now no higher than it was at its June peak when I last highlighted the extreme nature of its valuation multiples. Given the widespread bullish positioning in options markets, downside momentum could gather on any further weakness as options traders and margin-funded long positions are forced to reverse their bets.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/2206ab5285cec323d0c2e852c6445b66\" alt=\"Chart of NVDA\" title=\"Chart of NVDA\" tg-width=\"640\" tg-height=\"232\"/><span>Chart of NVDA</span></p><p style=\"text-align: left;\"><strong>NVDA Stock Price (Bloomberg)</strong></p><p></p><h2 id=\"id_4263502009\">Summary</h2><p>Nvidia bulls face several significant risks over the coming quarters, including the declining profitability of their main customers, surging accounts receivable, excessive optimism around the stock, and a deterioration in the price chart. A significant decline in the stock seems highly likely in 2025.</p></body></html>","source":"lsy1728464409321","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>4 Underappreciated Risks Facing Nvidia Bulls</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\n4 Underappreciated Risks Facing Nvidia Bulls\n</h2>\n\n<h4 class=\"meta\">\n\n\n2025-01-12 10:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4748780-4-underappreciated-risks-facing-nvidia-bulls><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryHeavy reliance on a few mega-cap tech companies poses a significant risk to Nvidia Corporation sales should investors begin to demand capital discipline from these companies.The surge in Nvidia...</p>\n\n<a href=\"https://seekingalpha.com/article/4748780-4-underappreciated-risks-facing-nvidia-bulls\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NVDA":"英伟达"},"source_url":"https://seekingalpha.com/article/4748780-4-underappreciated-risks-facing-nvidia-bulls","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1162107727","content_text":"SummaryHeavy reliance on a few mega-cap tech companies poses a significant risk to Nvidia Corporation sales should investors begin to demand capital discipline from these companies.The surge in Nvidia's accounts receivable will act as a headwind to sales, as their customers already owe the company significant amounts of cash.Widespread optimism among analysts and options traders poses a risk to valuation multiples should the bullish trend reverse.The failure of the stock to reach new highs recently, combined with recent bearish price action, suggests a potential significant trend change could be afoot.Nvidia Corporation building in Taipei, Taiwan.BING-JHEN HONGThe bullish case for Nvidia Corporation (NASDAQ:NVDA) rests on the continuation of the company's blockbuster earnings growth, which many believe will allow the stock to grow into its elevated valuation multiples. However, I see four underappreciated risks facing the company over the next 12 months. The first is that the decline in profitability of Nvidia's main customers causes a sharp stock price decline and a shift towards capital discipline. Second is the extreme rise in Nvidia's accounts receivable, which may act as a headwind to future sales growth. Third is the extreme levels of optimism among analysts and options markets regarding the stock's outlook. Fourth is the failure of the stock price to rise to new highs despite this widespread optimism. Taken together, I maintain my strong sell rating on the stock and remain short.1) Declining Profitability Of Nvidia's Main CustomersIt could well be the case that a large share of Nvidia's earnings will turn out to reflect malinvestment resulting from the excessive spending among mega-cap tech stocks that has been enabled by the surge in their share prices. It has been estimated that as much as half of Nvidia's sales come from just four companies, namely Microsoft (MSFT), Meta Platforms (META) Amazon (AMZN), and Alphabet (GOOGL), while Tesla (TSLA) is also thought to be a significant customer. This may appear to be a positive thing, as these companies on the whole are highly stable and growing strongly. However, this level of concentration is troubling for several reasons.One risk that has been well documented is that the major cloud computing customers reduce their reliance on Nvidia's chips via their own in-house AI chip development efforts. However, a less well-documented risk comes from a potential collapse in AI industry capex if the valuation bubble in mega-cap tech stocks bursts, leading to a shift towards capital discipline.Over the past year, MSFT, META, GOOGL, AMZN, and TSLA have spent over $200bn in capex, equivalent to 20% of the entire S&P500. If it is true that 50% of Nvidia's sales are to these companies, this means that almost one-third of the capex from these companies has found its way into Nvidia's coffers.Chart of Mag 7 CapexBloombergThis huge investment spending has been enabled by the relentless appetite among investors for these stocks, sending a signal to management to continue full steam ahead despite there being little to show for these investments in terms of monetization. Moreover, stock-based compensation, or SBC, for these five companies amounted to $75bn over the same period, equivalent to 36% of the entire S&P500 SBC. While stock-based compensation among these companies is of no benefit to Nvidia directly, their ability to offer expensive stock as compensation to employees has allowed them to ramp up AI training expenditure. Taken together, the combined value of capex and SBC among these five stocks has amounted to 19% of total sales over the past year. As a result, free cash flows excluding stock-based compensation for the group have actually declined over the past two quarters.Chart of Mag 7 Cash flowsBloombergThe problem now is that these five stocks collectively trade at over 60x free cash flow ex-stock-based compensation, resulting in a free cash flow yield of around 1.5%. Meanwhile, 30-year inflation-linked bonds offer a yield of 2.6%. Such negative risk premiums have not been seen since the height of the late-1990s stock bubble, and strongly suggest that the current bubble is in its final stages. Any decline in the price of these five stocks could trigger a shift in priorities among management teams in favor of capital discipline. That could make it much more expensive for them to dish out stock-based compensation to employees to train AI models.2) Surging Accounts Receivable Is A Headwind For SalesAn additional risk to Nvidia comes from the astonishing increase in accounts receivable, which increased by $9.4bn in the past four quarters. In the last quarter alone, the figure rose by $3.6bn. The sudden increase relative to sales stands out as being extreme when measured relative to the rest of the mega-cap universe, as shown in the chart below.Chart of Mega Cap Accounts ReceivableBloombergConsidering that around half of the companies' revenues come from highly stable mega-cap stocks, there is little risk that these reported earnings will not flow into the cash coffers. However, it does create a headwind for future sales, as its customers already owe the company significant amounts of cash.3) Sentiment, Positioning, And Wild Valuation ProjectionsThe price of 1-year call options on the stock exceeds the price of 1-year put options, which has only occurred a handful of times over the past decade, typically after a large stock price increase has already happened. As most investors use options as a hedge against a fall in the price of their stock holdings, the fact that it costs more to hedge against a large gain relative to a large drop indicated a large degree of speculative interest in the stock.Chart of NVDA Option VolatilityPrice of 1-Year NVDA Implied Call Option Volatility Vs Put Option Volatility (Bloomberg)Wall Street is also extremely bullish on the stock, with zero analysts giving it a sell rating. Meanwhile, the 12-month price target is fully 23% above current levels and 17% above its all-time high. We have also seen a proliferation of analyses calling for Nvidia to reach staggering valuations as high as $10tn, often justified by its low PEG (price-to-earnings-to-growth) ratio, such as this article. The author argues that Nvidia is a bargain due to expected earnings growth being higher than its forward P/E ratio. Leaving aside the fact that this double counts the rapid earnings growth expected in 2025, the PEG ratio is an extremely flawed valuation metric. It fails to consider the inevitable slowdown in growth that results once a company's earnings reach a significant share of the economy. It is the kind of metric that is brought out to justify paying extreme multiples for a stock.Table of PEG RatiosBarrons4) Concerning Chart PatternDespite the widespread optimism towards Nvidia's stock, its price has failed to break out into new highs, and the large downside reversal candle seen on January 7 hints at a potential reversal pattern. The stock is now no higher than it was at its June peak when I last highlighted the extreme nature of its valuation multiples. Given the widespread bullish positioning in options markets, downside momentum could gather on any further weakness as options traders and margin-funded long positions are forced to reverse their bets.Chart of NVDANVDA Stock Price (Bloomberg)SummaryNvidia bulls face several significant risks over the coming quarters, including the declining profitability of their main customers, surging accounts receivable, excessive optimism around the stock, and a deterioration in the price chart. A significant decline in the stock seems highly likely in 2025.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":391835639689728,"gmtCreate":1736700594271,"gmtModify":1736732328212,"author":{"id":"3571271386020652","authorId":"3571271386020652","name":"MetaMonkey","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":4,"crmLevelSwitch":0,"idStr":"3571271386020652","authorIdStr":"3571271386020652"},"htmlText":"It's bear shit! lol. This person writing this article has been paid by bears. Scandalous&nbsp;","listText":"It's bear shit! lol. This person writing this article has been paid by bears. Scandalous&nbsp;","text":"It's bear shit! lol. This person writing this article has been paid by bears. Scandalous","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/391835639689728","repostId":1162107727,"repostType":2,"repost":{"id":"1162107727","kind":"news","pubTimestamp":1736647249,"share":"https://ttm.financial/m/news/1162107727?lang=&edition=fundamental","pubTime":"2025-01-12 10:00","market":"us","language":"en","title":"4 Underappreciated Risks Facing Nvidia Bulls","url":"https://stock-news.laohu8.com/highlight/detail?id=1162107727","media":"Seeking Alpha","summary":"SummaryHeavy reliance on a few mega-cap tech companies poses a significant risk to Nvidia Corporation sales should investors begin to demand capital discipline from these companies.The surge in Nvidia","content":"<html><head></head><body><h2 id=\"id_1684018099\">Summary</h2><ul style=\"\"><li><p>Heavy reliance on a few mega-cap tech companies poses a significant risk to Nvidia Corporation sales should investors begin to demand capital discipline from these companies.</p></li><li><p>The surge in Nvidia&#39;s accounts receivable will act as a headwind to sales, as their customers already owe the company significant amounts of cash.</p></li><li><p>Widespread optimism among analysts and options traders poses a risk to valuation multiples should the bullish trend reverse.</p></li><li><p>The failure of the stock to reach new highs recently, combined with recent bearish price action, suggests a potential significant trend change could be afoot.</p></li></ul><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/6144f6f01bec9d39bca22c82ac595a7e\" alt=\"Nvidia Corporation building in Taipei, Taiwan.\" title=\"Nvidia Corporation building in Taipei, Taiwan.\" tg-width=\"750\" tg-height=\"500\"/><span>Nvidia Corporation building in Taipei, Taiwan.</span></p><p></p><p><strong>BING-JHEN HONG</strong></p><p></p><p>The bullish case for <strong>Nvidia Corporation</strong> (NASDAQ:NVDA) rests on the continuation of the company&#39;s blockbuster earnings growth, which many believe will allow the stock to grow into its elevated valuation multiples. However, I see four underappreciated risks facing the company over the next 12 months. The first is that the decline in profitability of Nvidia&#39;s main customers causes a sharp stock price decline and a shift towards capital discipline. Second is the extreme rise in Nvidia&#39;s accounts receivable, which may act as a headwind to future sales growth. Third is the extreme levels of optimism among analysts and options markets regarding the stock&#39;s outlook. Fourth is the failure of the stock price to rise to new highs despite this widespread optimism. Taken together, I maintain my strong sell rating on the stock and remain short.</p><h2 id=\"id_3090282346\">1) Declining Profitability Of Nvidia&#39;s Main Customers</h2><p>It could well be the case that a large share of Nvidia&#39;s earnings will turn out to reflect malinvestment resulting from the excessive spending among mega-cap tech stocks that has been enabled by the surge in their share prices. It has been estimated that as much as half of Nvidia&#39;s sales come from just four companies, namely Microsoft (MSFT), Meta Platforms (META) Amazon (AMZN), and Alphabet (GOOGL), while Tesla (TSLA) is also thought to be a significant customer. This may appear to be a positive thing, as these companies on the whole are highly stable and growing strongly. However, this level of concentration is troubling for several reasons.</p><p>One risk that has been well documented is that the major cloud computing customers reduce their reliance on Nvidia&#39;s chips via their own in-house AI chip development efforts. However, a less well-documented risk comes from a potential collapse in AI industry capex if the valuation bubble in mega-cap tech stocks bursts, leading to a shift towards capital discipline.</p><p>Over the past year, MSFT, META, GOOGL, AMZN, and TSLA have spent over $200bn in capex, equivalent to 20% of the entire S&amp;P500. If it is true that 50% of Nvidia&#39;s sales are to these companies, this means that almost one-third of the capex from these companies has found its way into Nvidia&#39;s coffers.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/25f238808ceeaa53ad53bbf8b3ac0497\" alt=\"Chart of Mag 7 Capex\" title=\"Chart of Mag 7 Capex\" tg-width=\"640\" tg-height=\"418\"/><span>Chart of Mag 7 Capex</span></p><p style=\"text-align: left;\"><strong>Bloomberg</strong></p><p></p><p>This huge investment spending has been enabled by the relentless appetite among investors for these stocks, sending a signal to management to continue full steam ahead despite there being little to show for these investments in terms of monetization. Moreover, stock-based compensation, or SBC, for these five companies amounted to $75bn over the same period, equivalent to 36% of the entire S&amp;P500 SBC. While stock-based compensation among these companies is of no benefit to Nvidia directly, their ability to offer expensive stock as compensation to employees has allowed them to ramp up AI training expenditure. Taken together, the combined value of capex and SBC among these five stocks has amounted to 19% of total sales over the past year. As a result, free cash flows excluding stock-based compensation for the group have actually declined over the past two quarters.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/756a69bc3fb19081b4586223420dd9fe\" alt=\"Chart of Mag 7 Cash flows\" title=\"Chart of Mag 7 Cash flows\" tg-width=\"640\" tg-height=\"418\"/><span>Chart of Mag 7 Cash flows</span></p><p style=\"text-align: left;\"><strong>Bloomberg</strong></p><p></p><p>The problem now is that these five stocks collectively trade at over 60x free cash flow ex-stock-based compensation, resulting in a free cash flow yield of around 1.5%. Meanwhile, 30-year inflation-linked bonds offer a yield of 2.6%. Such negative risk premiums have not been seen since the height of the late-1990s stock bubble, and strongly suggest that the current bubble is in its final stages. Any decline in the price of these five stocks could trigger a shift in priorities among management teams in favor of capital discipline. That could make it much more expensive for them to dish out stock-based compensation to employees to train AI models.</p><h2 id=\"id_2413479590\">2) Surging Accounts Receivable Is A Headwind For Sales</h2><p>An additional risk to Nvidia comes from the astonishing increase in accounts receivable, which increased by $9.4bn in the past four quarters. In the last quarter alone, the figure rose by $3.6bn. The sudden increase relative to sales stands out as being extreme when measured relative to the rest of the mega-cap universe, as shown in the chart below.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/bae2b98938d00814e2e1fdf7b61cee20\" alt=\"Chart of Mega Cap Accounts Receivable\" title=\"Chart of Mega Cap Accounts Receivable\" tg-width=\"640\" tg-height=\"445\"/><span>Chart of Mega Cap Accounts Receivable</span></p><p style=\"text-align: left;\"><strong>Bloomberg</strong></p><p></p><p>Considering that around half of the companies&#39; revenues come from highly stable mega-cap stocks, there is little risk that these reported earnings will not flow into the cash coffers. However, it does create a headwind for future sales, as its customers already owe the company significant amounts of cash.</p><h2 id=\"id_4278785936\">3) Sentiment, Positioning, And Wild Valuation Projections</h2><p>The price of 1-year call options on the stock exceeds the price of 1-year put options, which has only occurred a handful of times over the past decade, typically after a large stock price increase has already happened. As most investors use options as a hedge against a fall in the price of their stock holdings, the fact that it costs more to hedge against a large gain relative to a large drop indicated a large degree of speculative interest in the stock.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/f1b417dee9e02ccf920a94eeee0c6f89\" alt=\"Chart of NVDA Option Volatility\" title=\"Chart of NVDA Option Volatility\" tg-width=\"640\" tg-height=\"224\"/><span>Chart of NVDA Option Volatility</span></p><p style=\"text-align: left;\"><strong>Price of 1-Year NVDA Implied Call Option Volatility Vs Put Option Volatility (Bloomberg)</strong></p><p></p><p>Wall Street is also extremely bullish on the stock, with zero analysts giving it a sell rating. Meanwhile, the 12-month price target is fully 23% above current levels and 17% above its all-time high. We have also seen a proliferation of analyses calling for Nvidia to reach staggering valuations as high as $10tn, often justified by its low PEG (price-to-earnings-to-growth) ratio, such as this article. The author argues that Nvidia is a bargain due to expected earnings growth being higher than its forward P/E ratio. Leaving aside the fact that this double counts the rapid earnings growth expected in 2025, the PEG ratio is an extremely flawed valuation metric. It fails to consider the inevitable slowdown in growth that results once a company&#39;s earnings reach a significant share of the economy. It is the kind of metric that is brought out to justify paying extreme multiples for a stock.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/3da07b16243a12a5d8e85c36d6ffd820\" alt=\"Table of PEG Ratios\" title=\"Table of PEG Ratios\" tg-width=\"640\" tg-height=\"485\"/><span>Table of PEG Ratios</span></p><p style=\"text-align: left;\"><strong>Barrons</strong></p><p></p><h2 id=\"id_1548182104\">4) Concerning Chart Pattern</h2><p>Despite the widespread optimism towards Nvidia&#39;s stock, its price has failed to break out into new highs, and the large downside reversal candle seen on January 7 hints at a potential reversal pattern. The stock is now no higher than it was at its June peak when I last highlighted the extreme nature of its valuation multiples. Given the widespread bullish positioning in options markets, downside momentum could gather on any further weakness as options traders and margin-funded long positions are forced to reverse their bets.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/2206ab5285cec323d0c2e852c6445b66\" alt=\"Chart of NVDA\" title=\"Chart of NVDA\" tg-width=\"640\" tg-height=\"232\"/><span>Chart of NVDA</span></p><p style=\"text-align: left;\"><strong>NVDA Stock Price (Bloomberg)</strong></p><p></p><h2 id=\"id_4263502009\">Summary</h2><p>Nvidia bulls face several significant risks over the coming quarters, including the declining profitability of their main customers, surging accounts receivable, excessive optimism around the stock, and a deterioration in the price chart. A significant decline in the stock seems highly likely in 2025.</p></body></html>","source":"lsy1728464409321","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>4 Underappreciated Risks Facing Nvidia Bulls</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\n4 Underappreciated Risks Facing Nvidia Bulls\n</h2>\n\n<h4 class=\"meta\">\n\n\n2025-01-12 10:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4748780-4-underappreciated-risks-facing-nvidia-bulls><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryHeavy reliance on a few mega-cap tech companies poses a significant risk to Nvidia Corporation sales should investors begin to demand capital discipline from these companies.The surge in Nvidia...</p>\n\n<a href=\"https://seekingalpha.com/article/4748780-4-underappreciated-risks-facing-nvidia-bulls\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NVDA":"英伟达"},"source_url":"https://seekingalpha.com/article/4748780-4-underappreciated-risks-facing-nvidia-bulls","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1162107727","content_text":"SummaryHeavy reliance on a few mega-cap tech companies poses a significant risk to Nvidia Corporation sales should investors begin to demand capital discipline from these companies.The surge in Nvidia's accounts receivable will act as a headwind to sales, as their customers already owe the company significant amounts of cash.Widespread optimism among analysts and options traders poses a risk to valuation multiples should the bullish trend reverse.The failure of the stock to reach new highs recently, combined with recent bearish price action, suggests a potential significant trend change could be afoot.Nvidia Corporation building in Taipei, Taiwan.BING-JHEN HONGThe bullish case for Nvidia Corporation (NASDAQ:NVDA) rests on the continuation of the company's blockbuster earnings growth, which many believe will allow the stock to grow into its elevated valuation multiples. However, I see four underappreciated risks facing the company over the next 12 months. The first is that the decline in profitability of Nvidia's main customers causes a sharp stock price decline and a shift towards capital discipline. Second is the extreme rise in Nvidia's accounts receivable, which may act as a headwind to future sales growth. Third is the extreme levels of optimism among analysts and options markets regarding the stock's outlook. Fourth is the failure of the stock price to rise to new highs despite this widespread optimism. Taken together, I maintain my strong sell rating on the stock and remain short.1) Declining Profitability Of Nvidia's Main CustomersIt could well be the case that a large share of Nvidia's earnings will turn out to reflect malinvestment resulting from the excessive spending among mega-cap tech stocks that has been enabled by the surge in their share prices. It has been estimated that as much as half of Nvidia's sales come from just four companies, namely Microsoft (MSFT), Meta Platforms (META) Amazon (AMZN), and Alphabet (GOOGL), while Tesla (TSLA) is also thought to be a significant customer. This may appear to be a positive thing, as these companies on the whole are highly stable and growing strongly. However, this level of concentration is troubling for several reasons.One risk that has been well documented is that the major cloud computing customers reduce their reliance on Nvidia's chips via their own in-house AI chip development efforts. However, a less well-documented risk comes from a potential collapse in AI industry capex if the valuation bubble in mega-cap tech stocks bursts, leading to a shift towards capital discipline.Over the past year, MSFT, META, GOOGL, AMZN, and TSLA have spent over $200bn in capex, equivalent to 20% of the entire S&P500. If it is true that 50% of Nvidia's sales are to these companies, this means that almost one-third of the capex from these companies has found its way into Nvidia's coffers.Chart of Mag 7 CapexBloombergThis huge investment spending has been enabled by the relentless appetite among investors for these stocks, sending a signal to management to continue full steam ahead despite there being little to show for these investments in terms of monetization. Moreover, stock-based compensation, or SBC, for these five companies amounted to $75bn over the same period, equivalent to 36% of the entire S&P500 SBC. While stock-based compensation among these companies is of no benefit to Nvidia directly, their ability to offer expensive stock as compensation to employees has allowed them to ramp up AI training expenditure. Taken together, the combined value of capex and SBC among these five stocks has amounted to 19% of total sales over the past year. As a result, free cash flows excluding stock-based compensation for the group have actually declined over the past two quarters.Chart of Mag 7 Cash flowsBloombergThe problem now is that these five stocks collectively trade at over 60x free cash flow ex-stock-based compensation, resulting in a free cash flow yield of around 1.5%. Meanwhile, 30-year inflation-linked bonds offer a yield of 2.6%. Such negative risk premiums have not been seen since the height of the late-1990s stock bubble, and strongly suggest that the current bubble is in its final stages. Any decline in the price of these five stocks could trigger a shift in priorities among management teams in favor of capital discipline. That could make it much more expensive for them to dish out stock-based compensation to employees to train AI models.2) Surging Accounts Receivable Is A Headwind For SalesAn additional risk to Nvidia comes from the astonishing increase in accounts receivable, which increased by $9.4bn in the past four quarters. In the last quarter alone, the figure rose by $3.6bn. The sudden increase relative to sales stands out as being extreme when measured relative to the rest of the mega-cap universe, as shown in the chart below.Chart of Mega Cap Accounts ReceivableBloombergConsidering that around half of the companies' revenues come from highly stable mega-cap stocks, there is little risk that these reported earnings will not flow into the cash coffers. However, it does create a headwind for future sales, as its customers already owe the company significant amounts of cash.3) Sentiment, Positioning, And Wild Valuation ProjectionsThe price of 1-year call options on the stock exceeds the price of 1-year put options, which has only occurred a handful of times over the past decade, typically after a large stock price increase has already happened. As most investors use options as a hedge against a fall in the price of their stock holdings, the fact that it costs more to hedge against a large gain relative to a large drop indicated a large degree of speculative interest in the stock.Chart of NVDA Option VolatilityPrice of 1-Year NVDA Implied Call Option Volatility Vs Put Option Volatility (Bloomberg)Wall Street is also extremely bullish on the stock, with zero analysts giving it a sell rating. Meanwhile, the 12-month price target is fully 23% above current levels and 17% above its all-time high. We have also seen a proliferation of analyses calling for Nvidia to reach staggering valuations as high as $10tn, often justified by its low PEG (price-to-earnings-to-growth) ratio, such as this article. The author argues that Nvidia is a bargain due to expected earnings growth being higher than its forward P/E ratio. Leaving aside the fact that this double counts the rapid earnings growth expected in 2025, the PEG ratio is an extremely flawed valuation metric. It fails to consider the inevitable slowdown in growth that results once a company's earnings reach a significant share of the economy. It is the kind of metric that is brought out to justify paying extreme multiples for a stock.Table of PEG RatiosBarrons4) Concerning Chart PatternDespite the widespread optimism towards Nvidia's stock, its price has failed to break out into new highs, and the large downside reversal candle seen on January 7 hints at a potential reversal pattern. The stock is now no higher than it was at its June peak when I last highlighted the extreme nature of its valuation multiples. Given the widespread bullish positioning in options markets, downside momentum could gather on any further weakness as options traders and margin-funded long positions are forced to reverse their bets.Chart of NVDANVDA Stock Price (Bloomberg)SummaryNvidia bulls face several significant risks over the coming quarters, including the declining profitability of their main customers, surging accounts receivable, excessive optimism around the stock, and a deterioration in the price chart. A significant decline in the stock seems highly likely in 2025.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":391820958122160,"gmtCreate":1736665464954,"gmtModify":1736667246789,"author":{"id":"3574807189087941","authorId":"3574807189087941","name":"Icywinddale","avatar":"https://static.itradeup.com/news/3bd2fbf9d90e26b2f600b2c5d7c54244","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3574807189087941","authorIdStr":"3574807189087941"},"htmlText":"Bull shit","listText":"Bull shit","text":"Bull shit","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":4,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/391820958122160","repostId":1162107727,"repostType":2,"repost":{"id":"1162107727","kind":"news","pubTimestamp":1736647249,"share":"https://ttm.financial/m/news/1162107727?lang=&edition=fundamental","pubTime":"2025-01-12 10:00","market":"us","language":"en","title":"4 Underappreciated Risks Facing Nvidia Bulls","url":"https://stock-news.laohu8.com/highlight/detail?id=1162107727","media":"Seeking Alpha","summary":"SummaryHeavy reliance on a few mega-cap tech companies poses a significant risk to Nvidia Corporation sales should investors begin to demand capital discipline from these companies.The surge in Nvidia","content":"<html><head></head><body><h2 id=\"id_1684018099\">Summary</h2><ul style=\"\"><li><p>Heavy reliance on a few mega-cap tech companies poses a significant risk to Nvidia Corporation sales should investors begin to demand capital discipline from these companies.</p></li><li><p>The surge in Nvidia&#39;s accounts receivable will act as a headwind to sales, as their customers already owe the company significant amounts of cash.</p></li><li><p>Widespread optimism among analysts and options traders poses a risk to valuation multiples should the bullish trend reverse.</p></li><li><p>The failure of the stock to reach new highs recently, combined with recent bearish price action, suggests a potential significant trend change could be afoot.</p></li></ul><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/6144f6f01bec9d39bca22c82ac595a7e\" alt=\"Nvidia Corporation building in Taipei, Taiwan.\" title=\"Nvidia Corporation building in Taipei, Taiwan.\" tg-width=\"750\" tg-height=\"500\"/><span>Nvidia Corporation building in Taipei, Taiwan.</span></p><p></p><p><strong>BING-JHEN HONG</strong></p><p></p><p>The bullish case for <strong>Nvidia Corporation</strong> (NASDAQ:NVDA) rests on the continuation of the company&#39;s blockbuster earnings growth, which many believe will allow the stock to grow into its elevated valuation multiples. However, I see four underappreciated risks facing the company over the next 12 months. The first is that the decline in profitability of Nvidia&#39;s main customers causes a sharp stock price decline and a shift towards capital discipline. Second is the extreme rise in Nvidia&#39;s accounts receivable, which may act as a headwind to future sales growth. Third is the extreme levels of optimism among analysts and options markets regarding the stock&#39;s outlook. Fourth is the failure of the stock price to rise to new highs despite this widespread optimism. Taken together, I maintain my strong sell rating on the stock and remain short.</p><h2 id=\"id_3090282346\">1) Declining Profitability Of Nvidia&#39;s Main Customers</h2><p>It could well be the case that a large share of Nvidia&#39;s earnings will turn out to reflect malinvestment resulting from the excessive spending among mega-cap tech stocks that has been enabled by the surge in their share prices. It has been estimated that as much as half of Nvidia&#39;s sales come from just four companies, namely Microsoft (MSFT), Meta Platforms (META) Amazon (AMZN), and Alphabet (GOOGL), while Tesla (TSLA) is also thought to be a significant customer. This may appear to be a positive thing, as these companies on the whole are highly stable and growing strongly. However, this level of concentration is troubling for several reasons.</p><p>One risk that has been well documented is that the major cloud computing customers reduce their reliance on Nvidia&#39;s chips via their own in-house AI chip development efforts. However, a less well-documented risk comes from a potential collapse in AI industry capex if the valuation bubble in mega-cap tech stocks bursts, leading to a shift towards capital discipline.</p><p>Over the past year, MSFT, META, GOOGL, AMZN, and TSLA have spent over $200bn in capex, equivalent to 20% of the entire S&amp;P500. If it is true that 50% of Nvidia&#39;s sales are to these companies, this means that almost one-third of the capex from these companies has found its way into Nvidia&#39;s coffers.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/25f238808ceeaa53ad53bbf8b3ac0497\" alt=\"Chart of Mag 7 Capex\" title=\"Chart of Mag 7 Capex\" tg-width=\"640\" tg-height=\"418\"/><span>Chart of Mag 7 Capex</span></p><p style=\"text-align: left;\"><strong>Bloomberg</strong></p><p></p><p>This huge investment spending has been enabled by the relentless appetite among investors for these stocks, sending a signal to management to continue full steam ahead despite there being little to show for these investments in terms of monetization. Moreover, stock-based compensation, or SBC, for these five companies amounted to $75bn over the same period, equivalent to 36% of the entire S&amp;P500 SBC. While stock-based compensation among these companies is of no benefit to Nvidia directly, their ability to offer expensive stock as compensation to employees has allowed them to ramp up AI training expenditure. Taken together, the combined value of capex and SBC among these five stocks has amounted to 19% of total sales over the past year. As a result, free cash flows excluding stock-based compensation for the group have actually declined over the past two quarters.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/756a69bc3fb19081b4586223420dd9fe\" alt=\"Chart of Mag 7 Cash flows\" title=\"Chart of Mag 7 Cash flows\" tg-width=\"640\" tg-height=\"418\"/><span>Chart of Mag 7 Cash flows</span></p><p style=\"text-align: left;\"><strong>Bloomberg</strong></p><p></p><p>The problem now is that these five stocks collectively trade at over 60x free cash flow ex-stock-based compensation, resulting in a free cash flow yield of around 1.5%. Meanwhile, 30-year inflation-linked bonds offer a yield of 2.6%. Such negative risk premiums have not been seen since the height of the late-1990s stock bubble, and strongly suggest that the current bubble is in its final stages. Any decline in the price of these five stocks could trigger a shift in priorities among management teams in favor of capital discipline. That could make it much more expensive for them to dish out stock-based compensation to employees to train AI models.</p><h2 id=\"id_2413479590\">2) Surging Accounts Receivable Is A Headwind For Sales</h2><p>An additional risk to Nvidia comes from the astonishing increase in accounts receivable, which increased by $9.4bn in the past four quarters. In the last quarter alone, the figure rose by $3.6bn. The sudden increase relative to sales stands out as being extreme when measured relative to the rest of the mega-cap universe, as shown in the chart below.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/bae2b98938d00814e2e1fdf7b61cee20\" alt=\"Chart of Mega Cap Accounts Receivable\" title=\"Chart of Mega Cap Accounts Receivable\" tg-width=\"640\" tg-height=\"445\"/><span>Chart of Mega Cap Accounts Receivable</span></p><p style=\"text-align: left;\"><strong>Bloomberg</strong></p><p></p><p>Considering that around half of the companies&#39; revenues come from highly stable mega-cap stocks, there is little risk that these reported earnings will not flow into the cash coffers. However, it does create a headwind for future sales, as its customers already owe the company significant amounts of cash.</p><h2 id=\"id_4278785936\">3) Sentiment, Positioning, And Wild Valuation Projections</h2><p>The price of 1-year call options on the stock exceeds the price of 1-year put options, which has only occurred a handful of times over the past decade, typically after a large stock price increase has already happened. As most investors use options as a hedge against a fall in the price of their stock holdings, the fact that it costs more to hedge against a large gain relative to a large drop indicated a large degree of speculative interest in the stock.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/f1b417dee9e02ccf920a94eeee0c6f89\" alt=\"Chart of NVDA Option Volatility\" title=\"Chart of NVDA Option Volatility\" tg-width=\"640\" tg-height=\"224\"/><span>Chart of NVDA Option Volatility</span></p><p style=\"text-align: left;\"><strong>Price of 1-Year NVDA Implied Call Option Volatility Vs Put Option Volatility (Bloomberg)</strong></p><p></p><p>Wall Street is also extremely bullish on the stock, with zero analysts giving it a sell rating. Meanwhile, the 12-month price target is fully 23% above current levels and 17% above its all-time high. We have also seen a proliferation of analyses calling for Nvidia to reach staggering valuations as high as $10tn, often justified by its low PEG (price-to-earnings-to-growth) ratio, such as this article. The author argues that Nvidia is a bargain due to expected earnings growth being higher than its forward P/E ratio. Leaving aside the fact that this double counts the rapid earnings growth expected in 2025, the PEG ratio is an extremely flawed valuation metric. It fails to consider the inevitable slowdown in growth that results once a company&#39;s earnings reach a significant share of the economy. It is the kind of metric that is brought out to justify paying extreme multiples for a stock.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/3da07b16243a12a5d8e85c36d6ffd820\" alt=\"Table of PEG Ratios\" title=\"Table of PEG Ratios\" tg-width=\"640\" tg-height=\"485\"/><span>Table of PEG Ratios</span></p><p style=\"text-align: left;\"><strong>Barrons</strong></p><p></p><h2 id=\"id_1548182104\">4) Concerning Chart Pattern</h2><p>Despite the widespread optimism towards Nvidia&#39;s stock, its price has failed to break out into new highs, and the large downside reversal candle seen on January 7 hints at a potential reversal pattern. The stock is now no higher than it was at its June peak when I last highlighted the extreme nature of its valuation multiples. Given the widespread bullish positioning in options markets, downside momentum could gather on any further weakness as options traders and margin-funded long positions are forced to reverse their bets.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/2206ab5285cec323d0c2e852c6445b66\" alt=\"Chart of NVDA\" title=\"Chart of NVDA\" tg-width=\"640\" tg-height=\"232\"/><span>Chart of NVDA</span></p><p style=\"text-align: left;\"><strong>NVDA Stock Price (Bloomberg)</strong></p><p></p><h2 id=\"id_4263502009\">Summary</h2><p>Nvidia bulls face several significant risks over the coming quarters, including the declining profitability of their main customers, surging accounts receivable, excessive optimism around the stock, and a deterioration in the price chart. A significant decline in the stock seems highly likely in 2025.</p></body></html>","source":"lsy1728464409321","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>4 Underappreciated Risks Facing Nvidia Bulls</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\n4 Underappreciated Risks Facing Nvidia Bulls\n</h2>\n\n<h4 class=\"meta\">\n\n\n2025-01-12 10:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4748780-4-underappreciated-risks-facing-nvidia-bulls><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryHeavy reliance on a few mega-cap tech companies poses a significant risk to Nvidia Corporation sales should investors begin to demand capital discipline from these companies.The surge in Nvidia...</p>\n\n<a href=\"https://seekingalpha.com/article/4748780-4-underappreciated-risks-facing-nvidia-bulls\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NVDA":"英伟达"},"source_url":"https://seekingalpha.com/article/4748780-4-underappreciated-risks-facing-nvidia-bulls","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1162107727","content_text":"SummaryHeavy reliance on a few mega-cap tech companies poses a significant risk to Nvidia Corporation sales should investors begin to demand capital discipline from these companies.The surge in Nvidia's accounts receivable will act as a headwind to sales, as their customers already owe the company significant amounts of cash.Widespread optimism among analysts and options traders poses a risk to valuation multiples should the bullish trend reverse.The failure of the stock to reach new highs recently, combined with recent bearish price action, suggests a potential significant trend change could be afoot.Nvidia Corporation building in Taipei, Taiwan.BING-JHEN HONGThe bullish case for Nvidia Corporation (NASDAQ:NVDA) rests on the continuation of the company's blockbuster earnings growth, which many believe will allow the stock to grow into its elevated valuation multiples. However, I see four underappreciated risks facing the company over the next 12 months. The first is that the decline in profitability of Nvidia's main customers causes a sharp stock price decline and a shift towards capital discipline. Second is the extreme rise in Nvidia's accounts receivable, which may act as a headwind to future sales growth. Third is the extreme levels of optimism among analysts and options markets regarding the stock's outlook. Fourth is the failure of the stock price to rise to new highs despite this widespread optimism. Taken together, I maintain my strong sell rating on the stock and remain short.1) Declining Profitability Of Nvidia's Main CustomersIt could well be the case that a large share of Nvidia's earnings will turn out to reflect malinvestment resulting from the excessive spending among mega-cap tech stocks that has been enabled by the surge in their share prices. It has been estimated that as much as half of Nvidia's sales come from just four companies, namely Microsoft (MSFT), Meta Platforms (META) Amazon (AMZN), and Alphabet (GOOGL), while Tesla (TSLA) is also thought to be a significant customer. This may appear to be a positive thing, as these companies on the whole are highly stable and growing strongly. However, this level of concentration is troubling for several reasons.One risk that has been well documented is that the major cloud computing customers reduce their reliance on Nvidia's chips via their own in-house AI chip development efforts. However, a less well-documented risk comes from a potential collapse in AI industry capex if the valuation bubble in mega-cap tech stocks bursts, leading to a shift towards capital discipline.Over the past year, MSFT, META, GOOGL, AMZN, and TSLA have spent over $200bn in capex, equivalent to 20% of the entire S&P500. If it is true that 50% of Nvidia's sales are to these companies, this means that almost one-third of the capex from these companies has found its way into Nvidia's coffers.Chart of Mag 7 CapexBloombergThis huge investment spending has been enabled by the relentless appetite among investors for these stocks, sending a signal to management to continue full steam ahead despite there being little to show for these investments in terms of monetization. Moreover, stock-based compensation, or SBC, for these five companies amounted to $75bn over the same period, equivalent to 36% of the entire S&P500 SBC. While stock-based compensation among these companies is of no benefit to Nvidia directly, their ability to offer expensive stock as compensation to employees has allowed them to ramp up AI training expenditure. Taken together, the combined value of capex and SBC among these five stocks has amounted to 19% of total sales over the past year. As a result, free cash flows excluding stock-based compensation for the group have actually declined over the past two quarters.Chart of Mag 7 Cash flowsBloombergThe problem now is that these five stocks collectively trade at over 60x free cash flow ex-stock-based compensation, resulting in a free cash flow yield of around 1.5%. Meanwhile, 30-year inflation-linked bonds offer a yield of 2.6%. Such negative risk premiums have not been seen since the height of the late-1990s stock bubble, and strongly suggest that the current bubble is in its final stages. Any decline in the price of these five stocks could trigger a shift in priorities among management teams in favor of capital discipline. That could make it much more expensive for them to dish out stock-based compensation to employees to train AI models.2) Surging Accounts Receivable Is A Headwind For SalesAn additional risk to Nvidia comes from the astonishing increase in accounts receivable, which increased by $9.4bn in the past four quarters. In the last quarter alone, the figure rose by $3.6bn. The sudden increase relative to sales stands out as being extreme when measured relative to the rest of the mega-cap universe, as shown in the chart below.Chart of Mega Cap Accounts ReceivableBloombergConsidering that around half of the companies' revenues come from highly stable mega-cap stocks, there is little risk that these reported earnings will not flow into the cash coffers. However, it does create a headwind for future sales, as its customers already owe the company significant amounts of cash.3) Sentiment, Positioning, And Wild Valuation ProjectionsThe price of 1-year call options on the stock exceeds the price of 1-year put options, which has only occurred a handful of times over the past decade, typically after a large stock price increase has already happened. As most investors use options as a hedge against a fall in the price of their stock holdings, the fact that it costs more to hedge against a large gain relative to a large drop indicated a large degree of speculative interest in the stock.Chart of NVDA Option VolatilityPrice of 1-Year NVDA Implied Call Option Volatility Vs Put Option Volatility (Bloomberg)Wall Street is also extremely bullish on the stock, with zero analysts giving it a sell rating. Meanwhile, the 12-month price target is fully 23% above current levels and 17% above its all-time high. We have also seen a proliferation of analyses calling for Nvidia to reach staggering valuations as high as $10tn, often justified by its low PEG (price-to-earnings-to-growth) ratio, such as this article. The author argues that Nvidia is a bargain due to expected earnings growth being higher than its forward P/E ratio. Leaving aside the fact that this double counts the rapid earnings growth expected in 2025, the PEG ratio is an extremely flawed valuation metric. It fails to consider the inevitable slowdown in growth that results once a company's earnings reach a significant share of the economy. It is the kind of metric that is brought out to justify paying extreme multiples for a stock.Table of PEG RatiosBarrons4) Concerning Chart PatternDespite the widespread optimism towards Nvidia's stock, its price has failed to break out into new highs, and the large downside reversal candle seen on January 7 hints at a potential reversal pattern. The stock is now no higher than it was at its June peak when I last highlighted the extreme nature of its valuation multiples. Given the widespread bullish positioning in options markets, downside momentum could gather on any further weakness as options traders and margin-funded long positions are forced to reverse their bets.Chart of NVDANVDA Stock Price (Bloomberg)SummaryNvidia bulls face several significant risks over the coming quarters, including the declining profitability of their main customers, surging accounts receivable, excessive optimism around the stock, and a deterioration in the price chart. A significant decline in the stock seems highly likely in 2025.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":25,"commentSize":3,"repostSize":2,"favoriteSize":5,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.30.2","shortVersion":"4.30.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1162107727"}