NVIDIA: Why I'm Changing My Rating to SELL

Just a short time ago, my analysis of NVIDIA showed significant upside. However, market conditions and risk profiles change. I have updated my financial model with new assumptions to reflect the current environment. As of October 1, 2025, with NVIDIA trading at a higher price of $215.50 a share, my model now indicates the stock is overvalued. My new analysis points to a SELL recommendation.

The Core of the Updated Model: A More Conservative Stance

My revised valuation is driven by a more conservative set of assumptions, reflecting what I see as increased risk and tempered growth expectations.

Key Updated Assumptions:

• 5-Year Revenue CAGR: 22.5%

  WACC (Discount Rate): 13.52%

  Terminal Growth Rate: 3.0%

The most significant change is the higher discount rate (WACC), which has increased from 11.55% to 13.52%. This is primarily due to an increase in the stock's Beta from 1.55 to 1.85, indicating higher perceived market risk. Furthermore, my revenue growth forecast is now more moderate, with sales projected to reach approximately $358 billion by fiscal year 2030, down from a previous forecast of $386 billion. This results in a lower projection for unlevered free cash flow, which is now expected to reach $101.9 billion in 2030.

New Valuation Results: A Shift to Overvalued

After incorporating these updated assumptions, my DCF model now generates an implied share price of $201.18. This represents a -6.6% downside from the current price of $215.50.

The alternative valuation, using a more conservative exit EV/EBITDA multiple of 18.0x, corroborates this view. This secondary method yields an even lower implied price of $182.55.

Given that both valuation methods point to a fair value below the current market price, my investment recommendation is now a SELL.

Understanding the New Sensitivity

The updated sensitivity analysis shows a valuation that is much more constrained. To see a significant upside, the underlying assumptions would need to change favorably. For the valuation to look attractive again, the WACC would need to fall back to 12.52% and the growth rate would need to be 3.5%, which would yield a price of $245.88.

Conversely, the downside risk is clear. If the WACC were to increase to 14.52% while the perpetual growth rate falls to 2.5%, the implied price drops to $167.31, representing a potential 22% downside from the current price. This highlights the stock's vulnerability to rising interest rates or a slowdown in its expected growth.

My Final Takeaway

While NVIDIA remains a foundational company in the AI sector, my financial model, updated with more conservative assumptions reflecting a higher risk profile, no longer supports its current market price. The analysis now indicates the stock is overvalued. My recommendation is to sell existing positions or avoid initiating new ones until the market price aligns more closely with what I calculate as its intrinsic value.