<div id="readability-page-1">Nvidia (NASDAQ:NVDA) offers investors a seemingly straightforward proposition: pay a steep premium for its share price and the dominant AI chipmaker will keep delivering incredible top- and bottom-line growth. That's been the case for the past few years, and if one is to believe CEO Jensen Huang, the success story will keep rolling along through the end of the decade.<h3>Claim 50% Off TipRanks Premium and Invest with Confidence </h3><ul><li>Unlock hedge-fund level data and powerful investing tools designed to help you make smarter, sharper decisions </li><li> Stay ahead of the market with the latest news and analysis so your portfolio is always positioned for maximum potential</li></ul> On the one hand, it is hard to quibble with the company's past performance, which manages to outpace the market's sky-high expectations again and again. The company's third quarter fiscal 2026 numbers were only the latest iteration of this ongoing trend. And yet, some storm clouds are appearing, as fears of an AI bubble are threatening to rain on Nvidia's parade. If hyperscaler capex starts to slow, so will Nvidia's growth. Even the distant rumblings of this possibility have been dragging down NVDA's share price, which has fallen by 17% since reaching a new record high in late October. However, despite the pullback, NVDA still trades at an elevated price-to-earnings ratio in the 40s. That leads to the question: Is the premium that one must pay for NVDA still worth it? Maybe not, according to top investor Daniel Sparks. &#34;The setback may not be significant enough to fully price in some of the stock's biggest risks,&#34; warns the 5-star investor, who is among the top 1% of stock pros covered by TipRanks. That doesn't mean that Nvidia is anything other than a &#34;great business,&#34; Sparks hastens to add. However, the investor further explains that NVDA's high valuation can only make sense if revenues continue to expand rapidly and its gross margins remain extremely elevated. Yet, both figures could fall regardless of how well Nvidia executes, which the investor readily admits it is likely to continue doing quite well. &#34;The bigger risk is that the AI buildout takes a breather,&#34; Sparks opined, noting that &#34;the semiconductor industry has been cyclical for years.&#34; Other wild cards include increasing competition from hyperscalers, who are designing their own chips, as well as murky export rules. Though Sparks isn't ready just yet to declare that the AI boom is &#34;fizzling out,&#34; the investor is keeping a wary eye fixed to the horizon for this very real possibility. &#34;The stock's high valuation means investors likely won't be very forgiving if the AI boom shows signs of slowing. I do not believe the stock's margin of safety at the moment is sufficient,&#34; sums up Sparks. (To watch Daniel Sparks' track record, click here) <blockquote> That's Sparks' opinion – Wall Street is nowhere close to throwing in the towel. With 39 Buys, 1 Hold, and 1 Sell, NVDA cruises to a Strong Buy consensus rating. Its 12-month average price target of $258.97 implies potential upside of ~51%. (See NVDA stock forecast) </blockquote></div>

NVDA

NVDL

07788

07388

NVDY

NVDD

NVDX

NVDQ

SOXL

Top investor Daniel Sparks questions the justification of Nvidia's high stock valuation, citing potential risks like slowing AI growth and increased competition. Despite Nvidia's strong past performance, Sparks warns that its elevated price-to-earnings ratio may not be sustainable if growth slows. While Wall Street remains optimistic with a Strong Buy consensus, Sparks remains cautious about the stock's margin of safety.

- Nvidia has positioned itself as a dominant AI chipmaker, promising substantial growth, but faces concerns about its future as fears of an AI bubble emerge.  
- Despite impressive past performance, a recent 17% share price drop raises questions about the sustainability of its elevated price-to-earnings ratio and whether the stock's premium is justified.  
- Investor Daniel Sparks warns of potential risks, suggesting that Nvidia's high valuation may not hold if growth slows, yet the overall consensus on Wall Street remains optimistic with a Strong Buy rating.

'It's Hard to Justify,' Says Top Investor About Nvidia Stock