- Wall Street shows mixed views on AI stocks, with HSBC cautious on Nvidia and Goldman optimistic.
- HSBC downgraded Nvidia from Buy to Hold, cutting its price target to $170 from $365.
- Nvidia faces uncertainty due to CEO Jensen Huang's departure and no permanent successor named.
Wall Street is sending mixed signals on the artificial intelligence trade. While HSBC has turned cautious on Nvidia, cutting its price target by more than half amid concerns over leadership uncertainty and potential US export restrictions, Goldman Sachs remains optimistic about the broader equity market, forecasting a 14% rally in the S&P 500 over the next 12 months.
According to a CNBC report, HSBC downgraded Nvidia to Hold from Buy, slashing its price target to $170 from $365. The revised target implies an upside of just 2.3% from Thursday's closing price, signalling limited near-term gains for the world's most valuable chipmaker.
The downgrade comes amid growing uncertainty over Nvidia's leadership following the reported departure of long-time CEO Jensen Huang. The company is yet to establish a permanent succession plan, with CFO Colette Kress reportedly taking over as interim CEO.
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CNBC reported that HSBC analyst Frank Lee said investor confidence could remain under pressure until the company outlines a clear leadership transition and its incoming chief executive demonstrates the ability to execute Nvidia's business strategy.
"We believe the uncertainties will prevail until a permanent succession plan is laid out and the new CEO is able to demonstrate execution capabilities," Lee said in a note to clients on Friday.
While HSBC believes Nvidia's fiscal 2028 fundamentals remain intact, it flagged the possibility of tighter US export restrictions following Congressional scrutiny. The brokerage's sensitivity analysis suggests additional curbs could reduce Nvidia's fiscal 2028 earnings estimates by 13%.
The downgrade adds to pressure on Nvidia shares, which were trading around $160.24, down 3.58%, at 12:16 PM EST on Friday.
In contrast to HSBC's cautious stance on Nvidia, Goldman Sachs expects US equities to recover and deliver positive returns despite a slowdown in corporate earnings growth.
According to Reuters, Goldman Sachs has set a 12-month target of 8,700 for the S&P 500, implying an upside of more than 14% from its previous close of 7,592.40.
The bullish outlook follows a sharp selloff in major technology stocks after the Democratic Party's victory in last week's US midterm elections fuelled concerns about a potential slowdown in data centre investments.
Goldman expects earnings growth across global markets to at least halve in 2027. In the US, earnings growth could moderate to 11% from 36%, partly reflecting slower capital expenditure growth by hyperscalers.
Such a slowdown could weigh on companies linked to AI infrastructure. However, Goldman believes more attractive valuations, resilient economic growth, lower bond yields and easing inflation could support equities.
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The brokerage noted that the S&P 500 is trading at around 18.5 times its 12-month forward earnings, significantly below recent highs of more than 23 times.
Goldman maintained its overweight stance on US and Japanese equities, while retaining neutral ratings on Asia and emerging markets and an underweight view on Europe.
"From here, we expect equities to generate positive returns, albeit with higher volatility than in recent years," Goldman Sachs said.
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