NVIDIA Corp (NASDAQ:NVDA) stock soared after second-quarter financial results and early 2028 guidance. A former hedge fund manager says the stock could double over the next year or two, but also has some concerns about the AI bubble bursting in the same time frame.
• NVIDIA stock is trending lower. Why are NVDA shares declining?
Whitney Tilson on NVDA Stock
Nvidia reported second-quarter results that beat analyst estimates, but it was its early 2028 unofficial guidance that stole the spotlight during the conference call.
“There’s no sign of a slowdown in demand for its chips, which are at the heart of the AI-infrastructure boom, former hedge fund manager Whitney Tilson said in a blog this week.
Tilson said the second-quarter revenue and earnings per share figures beat estimates, but were far from being “blowout numbers.”
The market expert highlighted the guidance for revenue growth of 70% in fiscal 2028, calling it “staggering.” Nvidia said the guidance would be more than 100% year-over-year revenue growth if not for supply constraints.
Tilson highlights some writings from market experts that share some of the negatives from Nvidia’s earnings report and conference call. This includes lower gross margin guidance and supply-chain commitments.
On the subject of supply-chain commitments, Tilson is cautious that the company’s strategy and growing commitments could “end poorly for Nvidia” if the AI bubble bursts. A report from the Wall Street Journal says that the company in the middle (Nvidia) can have supply chain commitments as insurance and a strategic advantage, but it can turn into a “painful liability.”
The Wall Street Journal compares the potential liabilities to Cisco Systems in 2001, with the company on the hook for commitments to suppliers when the dot-com bubble burst.
Tilson says one of the biggest risks for Nvidia is if OpenAI blows up, a move that “would roil the entire sector.
“I think this is likely,” Tilson said.
Tilson wrote more about a potential AI bubble burst earlier this week.
Buy or Sell Nvidia Stock Today?
So what are Nvidia investors left to do with the stock while there is a possibility of an AI bubble bursting and the company being hurt by its growing supply commitment strategy?
Tilson says Nvidia stock is currently cheap based on trading at around 25 times current-year earnings per share and around 17 times next year’s estimated earnings per share.
“These are very low multiples for a company this dominant, profitable and fast-growing. And if Nvidia hits its projected revenue numbers, earnings will be much higher than analyst expectations — and the stock could double in the next year or two. But that’s a big ‘if,’” Tilson said.
While Tilson views Nvidia stock as cheap based on P/E ratios, he said he only likes to “pound the table” on a stock like this when it’s down at least 50%. For Nvidia stock owners, Tilson says he wouldn’t sell.
“As I’ve said many times before, you must let your winners run! But you might want to use a stop loss to protect your gains.”
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