Nvidia's stock (NASDAQ:NVDA) surged 4% on Friday to close at $210.96, extending its weekly gain to roughly 8.3% as investors returned to the AI-chip leader after a period of underperformance. The stock is now up about 13% year-to-date from its adjusted year-end close of $186.27. However, a warning from Taiwan's central bank has highlighted a financial-cycle risk that could temper this momentum.
Taiwan's Warning Targets the Fuel Behind Nvidia's Boom
On July 9, Taiwan's central bank governor Yang Chin-long told lawmakers that while AI is driving genuine economic expansion, excessive borrowing by technology companies could encourage speculative investment and overbuilding. Taiwan's significance stems from TSMC's central role in the supply chain, serving Nvidia and other global tech firms. Yang did not declare an imminent collapse in AI demand or single out Nvidia's valuation, but his concern focused on the financial conditions supporting the boom.
“AI is driven by real growth potential,” Yang said at the parliamentary hearing, while warning about over-expansion caused by excessive leverage. This distinction directly impacts Nvidia's business model. The company supplies processors, networking equipment, and complete systems for AI data centers. Large cloud operators must spend heavily on chips, buildings, electricity, and cooling before those assets generate meaningful revenue.
For Nvidia, greater hyperscaler spending supports near-term sales. But if that expenditure leads to weaker cash flow, rising debt, or disappointing returns, customers could eventually delay data-center projects, extend the life of existing hardware, or increase their use of cheaper custom processors. Taiwan has thus highlighted a financial-cycle risk rather than a product weakness. Nvidia could remain the dominant AI-chip supplier and still suffer if the overall infrastructure budget grows more slowly.
Wall Street Still Sees Nvidia's Moat Intact
Bank of America remains firmly bullish. Analyst Vivek Arya reiterated a Buy rating and $350 price target, arguing that investors are undervaluing Nvidia's pricing power. Arya believes Nvidia can sustain roughly 65% to 70% of AI capital spending over the long term. He expects the Rubin platform to command higher prices than Blackwell, helping Nvidia maintain gross margins in the mid-70% range despite rising memory costs. For more on Nvidia's competitive landscape, see Nvidia Rises 2% as Meta's Custom AI Chip Seen as Complement, Not Threat.
Goldman Sachs analyst James Schneider has also maintained a Buy rating with a $285 target. Schneider noted that Nvidia trades at less than 14 times his forecast for 2027 earnings, a valuation he considers compelling given the company's growth. Even after allowing for market-share gains by custom AI chips and rival processors, Goldman expects Nvidia's revenue to climb about 55% to $635 billion next year. The message from both banks is that competition is real, but Nvidia's valuation already reflects considerable anxiety about it. For a deeper look at competitive threats, read Broadcom's Tomahawk 6 Targets Nvidia's Networking Stronghold in AI Data Centers.
Nvidia's record revenue demonstrates that AI infrastructure demand remains resilient, but Taiwan's warning underscores a key risk: the financial leverage behind that growth. Investors should monitor hyperscaler balance sheets and capital expenditure plans for signs of strain. For context on recent market rotations, see Nvidia Lags AI Peers as Rotation to Memory, Infrastructure Plays Accelerates.
This article is for informational purposes only and does not constitute financial advice.
