Nvidia stock downgraded by veteran tech investor Paul Wick on business risks

“Our enthusiasm has waned somewhat over the last one to two weeks,” Wick said via video call at a UBS Group AG event in Singapore on Friday, without explaining how much of the stakes have been lowered.

Wick – who has been investing in the technology sector for about 30 years – drew parallels between the boom of Nvidia and Cisco Systems Inc. during the dotcom bubble. High valuations and the lack of recurring revenue “make their businesses inherently riskier,” he said.

Nvidia gets about 60% to 70% of its revenue from its 10 largest customers, which “inherently makes it a much riskier company than Microsoft or Google, which have very low customer concentration and thousands and thousands of customers,” says Wick, who runs the $ 13.5 cost company manages. billion Columbia Seligman Technology & Information Fund.

The chipmaker recently briefly became the world’s most valuable company after its shares more than tripled in the past year on optimism about artificial intelligence. Still, many investors are betting the rally will continue, with Rob Arnott of Wick and Research Affiliates LLC among the few opponents.

Nvidia is trading at 43 times expected earnings next year, a richer valuation than all but one of its peers in the Philadelphia Semiconductor Index.

Generative AI companies that have spent billions on Nvidia systems have low returns on invested capital, Wick said. He added that “many of Nvidia’s largest customers are aggressively designing their own processors,” including Google, Microsoft Corp. and Meta Platforms Inc. from Alphabet Inc.

The stock remains among the top holdings of its fund, which has beaten 97% of its peers over the past three years, according to data compiled by Bloomberg.

Nvidia must “demonstrate that growth can continue at a robust level,” Wick said.