Wells Fargo’s Aaron Rakers reduced Nvidia’s (NVDA) stock price target from $375 to $315 earlier this month. Rakers has still maintained his “buy” signal, given that the upside is still more than 63% from current levels. Despite the “buy” signal, the drop in the stock price target could be a warning signs of what’s to come in the future. Let’s discuss.

Why Did Wells Fargo Reduce Nvidia’s Stock Price Target?

Nvidia (NVDA) is the clear dominator in the current AI-stock based market trend. The asset has hit multiple peaks in the last few years, and the company’s market cap has ballooned to greater numbers that the GDP of most countries. Nvidia’s (NVDA) surge is entirely due to high demand for its AI computing GPU (Graphics Processing Unit) chips.

The current trend seems clear: AI is the driving force. Profits are big and companies such as Micron, a key player in the AI memory chip supply chain, are reporting record numbers with supply sold out till 2027. In fact, the AI surge has led to a global chip shortage. The “Nvidia tax” has taken a strong hold and other electronics manufacturers are having to raise prices. Apple, Sony, etc. have all announced a price hike for their products.

The sudden rise in AI stock has, however, led to worries among investors and even central bankers. Top Chinese hedge funds have also expressed worry that the AI bubble is about to burst. According to Wealspring Asset founder Yang Dong, “The collapse point may not be far away.”

Popular trader and the expert who predicted the 2008 housing crisis, Michael Burry, has said that we are in an AI bubble. He has revealed bearish positions on Nvidia and Palantir. He says that the circular funding between AI companies is “a picture of fraud, not a flywheel.“

Also Read: $1,000 Invested in Nvidia at IPO: The Return Is Hard to Believe

The doubts around the AI landscape and the possibility of a bubble could be the reason why Wells Fargo reduced its stock price target for Nvidia (NVDA).