As Nvidia Corp.’s share price rises, a software analyst is laying out a possible scenario where the stock loses as much as 20 per cent of its value. 

Gil Luria, senior software analyst at D.A. Davidson, told BNN Bloomberg that chipmaker Nvidia is a good company that would have performed well with or without the boom in generative AI that has driven its sizable rally.

That boom has to wane at some point, he contended, and current estimates aren’t factoring that in.

“A lot of (Nvidia’s) big customers, the hyperscalers like Microsoft, Amazon, Google, and companies like Meta, are stocking up on its GPU products in order to facilitate all the experiments and pilots and new tools that everybody's working on for generative AI,” he said in a Tuesday television interview. 

“That's terrific news last year, it's going to be good news this year. But as they get to their capacity that they need to have, they're not going to keep buying this for years to come, which is what current Nvidia estimates imply.”  

Luria predicts revenue for the company will decline at some point during the next four to six quarters. As revenues contract, he expects the stock will no longer perform at its current level.

“The higher we go this year, the more we're going to fall next year, and that's not in the stock,” Luria said. 

He added that his prediction might be “very early,” but contended that Nvidia’s current highs are “not sustainable.” 

As of Tuesday afternoon, Nvidia shares finished trading 1.69 per cent higher at US$531.28. That’s about 240 per cent higher from the same time last year.

Nvidia benefited from AI enthusiasm last year, becoming the first chipmaker to reach a US$1 trillion market capitalization in May 2023.

One analyst described the stock as a must-own last August, while predicting its shares will reach US$800