Nvidia Stock Warning: Why Wedbush Is Worried About Rising Memory Prices

Memory has become the latest pressure point in the AI hardware race. With demand for high-bandwidth memory (HBM) continuing to outstrip supply, soaring memory prices are beginning to ripple across the semiconductor industry, forcing companies to rethink product designs and pricing strategies. Even Nvidia Corporation (NVDA), the undisputed leader of the AI chip market, appears to be feeling the effects.

On Wednesday, Wedbush Securities highlighted how rising memory costs are increasingly influencing Nvidia's business, from changes to the configuration of its upcoming Vera Rubin platform to another reported round of price hikes for its consumer graphics cards. The brokerage believes the company is navigating not only higher costs but also persistent supply constraints in a market where memory has become just as critical as the GPUs themselves.

While Nvidia remains firmly positioned at the heart of the AI spending boom, Wedbush’s latest observations suggest investors may need to pay closer attention to memory prices, as they could become an increasingly important factor shaping the company’s next phase of growth.

About Nvidia Stock

Founded in 1993 and headquartered in Santa Clara, California, Nvidia started out making graphics chips for gamers. Fast forward three decades, and it has become the company at the center of the artificial intelligence (AI) revolution.

Today, its GPUs power everything from AI data centers and cloud computing to robotics, autonomous vehicles, and high-performance computing. The company is also investing heavily in energy-efficient computing and next-generation technologies, ensuring it stays ahead as AI adoption accelerates.

With a market capitalization of $4.6 trillion, Nvidia remains one of the world’s most valuable companies. It recently ceded the top spot to Apple (AAPL), but after not long ago crossing the $5 trillion milestone, it’s safe to say Nvidia is not exactly losing sleep over the rankings.

Few stocks command attention quite like NVDA. When investors want a read on the AI trade, this is usually the first stock they examine. But this year has been a reminder that even the market’s biggest winners don’t move in a straight line. Year-to-date (YTD), NVDA has edged up 4.5%. After an incredible run, NVDA has seen its fair share of volatility.

NVDA climbed to a record high of $236.54 on May 14 before pulling back 18.4% as investors took some money off the table. The retreat came as AI enthusiasm cooled from its fever pitch, concerns resurfaced over whether hyperscale cloud companies could maintain their breakneck pace of AI spending, and competition across the semiconductor industry continued to heat up.

The pressure intensified earlier this week. Nvidia’s shares fell 5% on Monday after an extraordinary weekend of AI-related deal announcements shifted Wall Street’s attention from booming demand to the enormous price tag attached to the AI race. More than $750 billion in commitments and investments were announced, including over $500 billion tied to South Korea’s SK Group Alliance, a $1 billion investment in South Korean internet giant Naver, and a $250 billion OpenAI guarantee. The sheer scale of those commitments revived concerns about “circular financing,” where suppliers also become major investors in their customers.

That uncertainty has made investors increasingly cautious about whether massive AI infrastructure spending will ultimately generate the returns the market expects. NVDA stock has slipped 2.37% over the past three months and 6.7% over the last five trading sessions.

Even so, the longer-term story has not changed much. Nvidia's shares have generated an eye-popping 13,211% return over the past decade, gained 325.3% over the last three years, and climbed 87.8% over the past two years as demand for its AI accelerators continues to surge. The stock is also up 8.7% over the past year.

Technically, momentum has cooled but has not broken down. The 14-day RSI stands at 42.90, below the neutral 50 level, indicating buying momentum has weakened from earlier overbought conditions. Plus, the stock is not oversold, suggesting sellers have not fully taken control. Meanwhile, the MACD has flashed a fresh bullish crossover, with the MACD line moving back above the signal line. While that’s an encouraging sign, it is still early and points to improving momentum rather than an immediate breakout.

For a company that’s become the poster child of the AI boom, NVDA’s valuation is not as expensive. The stock is priced at about 21.14 times forward adjusted price-to-earnings, below both its sector average and its own historical multiple, suggesting investors are not paying the sky-high premium they once did. Sure, its 11.69 times price-to-sales (p/s) ratio is still richer than many peers, but that’s hardly shocking for a company growing revenue and profits at Nvidia's pace – and even that sits below its historical average.

Then there’s the dividend. Nvidia boosted its quarterly payout from just $0.01 to $0.25 per share, signaling not just its robust cash generation but also that it is confident enough to share more of it with shareholders.

Why Wedbush Thinks Memory Costs Are Becoming Nvidia's Next Headwind

For Wedbush analyst Matt Bryson, the real concern is not simply that memory has become more expensive – it is that those rising costs appear to be influencing Nvidia's product decisions. In a note to clients, the analyst pointed to the AI chip giant’s upcoming Vera Rubin platform, where the company has reportedly cut the capacity of its Small Outline Compression Attached Memory Modules in half. The move comes as memory now accounts for roughly 29% of system costs, well above Nvidia's preferred 20% threshold.

Bryson, however, believes that the bigger issue is supply. Despite Nvidia committing more capital than any other company to secure its supply chain, he argues the AI giant still does not have enough memory to support its targeted production volumes. That, he says, likely explains the decision to reduce memory capacity rather than an attempt to lower costs.

The reported changes are significant. The Vera CPU in Nvidia's NVL72 rack is now expected to feature 96GB of memory, down from the originally planned 192GB. Total rack memory has also reportedly been cut to around 28TB from 55TB. Notably, the 20.7TB of HBM4 memory attached to the GPUs remains unchanged, suggesting Nvidia is prioritizing the HBM critical for AI workloads while scaling back elsewhere to navigate supply constraints.

A Snapshot of Nvidia's Q1 Numbers

The chip giant delivered an impressive fiscal Q1 2027 earnings report in May that comfortably cleared expectations, proving that the appetite for AI infrastructure remains as strong as ever. Revenue surged 85% year-over-year (YOY) to $81.6 billion, while adjusted EPS more than doubled, climbing 140% to $1.87 per share. 

Nvidia streamlined the way it reports its business, splitting operations into just two platforms – Data Center and Edge Computing. The Data Center business revenue grew 92% YOY to $75.2 billion, powered by relentless spending from hyperscale cloud providers, enterprises, governments, and industrial customers racing to build AI infrastructure. Demand for Nvidia's latest Blackwell AI chips and networking products remained solid.

Hyperscale cloud customers alone contributed $37.9 billion in revenue, up 115% annually, while the company’s AI Cloud, Industrial, and Enterprise business brought in $37.4 billion, marking a 74% increase. Edge Computing added $6.4 billion in revenue, up 29%, thanks largely to healthy workstation demand despite a sluggish consumer PC market.

The cash kept rolling in, too. Nvidia wrapped up the quarter with $80.6 billion in cash and investments, generated $48.6 billion in free cash flow, repurchased $19.3 billion worth of stock, and paid $243 million in dividends.

The company is gearing up to release its Q2 2027 earnings report on Wednesday, Aug. 26. Management expects fiscal Q2 revenue of about $91 billion, plus or minus 2% – guidance that points to roughly 12% sequential growth and about 95% YOY growth at the midpoint. That's Wall Street’s cue that the AI spending spree still has plenty of fuel left in the tank.

Analysts tracking the AI chip company see fiscal Q2 2027 revenue to be around $91.82 billion, while EPS is projected to surge by 103% YOY to $2.01 per share. Zooming out, EPS is expected to be $8.79 in fiscal 2027, representing annual growth of 92.3%, and the bottom line could rise by another 38% YOY in fiscal 2028 to $12.13 per share.

What Do Analysts Expect for Nvidia Stock?

Overall, analysts are upbeat about NVDA’s growth potential, giving the stock a consensus rating of “Strong Buy.” Of the 47 analysts covering the stock, 43 advise a “Strong Buy,” three recommend a “Moderate Buy,” and only one is outright skeptical, suggesting a “Strong Sell.”

The average analyst price target for NVDA is $304.32, indicating potential upside of 57.4%. The Street-high target price of $500 suggests that the stock could rally as much as 158.7% from here.

Final Thoughts on NVDA Stock

Wedbush's warning does not change Nvidia's long-term AI story, but it does highlight a risk investors can't afford to ignore. With memory costs and supply constraints increasingly shaping product decisions, execution may matter just as much as demand going forward. Nvidia's upcoming Q2 results should offer a clearer picture of whether these pressures are temporary growing pains or the start of a more persistent headwind.