Negative Signs Are Mounting for NVDA, Veteran Investor Says

Reacting to Nvidia's (NVDA) recently announced writedown, Dan Niles,  the founder and Portfolio Manager of Niles Investment Management, questioned why the company apparently could not find any other buyers besides China for these AI chips.

Speaking on CNBC, Niles listed other signs which, he indicated, suggest that the demand for NVDA's chips has weakened.

Additionally, he predicted that the second-quarter estimates for NVDA and the other members of the Mag 7 would be cut in the near-to-medium term.

Signs of Slowing Demand for NVDA's Chips

"If the demand for Nvidia's chips is far outstripping supply, why did it write down the value of (a portion of ) its chips to zero? They couldn't find any other takers (besides China) for these chips?" he asked rhetorically.

He also noted that Nvidia's customers expect their capital expenditures to rise only about 5% this year, versus last year's jump of about 15%.

Finally, he pointed out that MSFT has abandoned a number of its data center leases, while the relatively cheap DeepSeek model of building AI systems is starting to be used in the U.S.

In light of these points, Niles contends that the "end demand (for Nvidia's products) is probably not as strong as most believe."

Niles Is Bearish on the Rest of the Mag 7

Niles expects the estimates for all of the Mag 7's Q2 results to drop after they report their Q1 results.

Asked whether he was looking to buy any of these names, Niles said "I don't get in front of estimate cuts."

He added that the valuation of the Mag 7 components remains high.

In addition to NVDA and MSFT, Amazon (AMZN), Apple (AAPL), Alphabet (GOOG),  Meta (META), and Tesla (TSLA) are members of the Mag 7.

While we acknowledge the potential of NVDA, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.

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Disclosure: The author owns shares of AMZN but has no intention of selling them in the next 48 hours. This article is originally published at Insider Monkey.