As the AI stock sell-off continues, so too does the Nvidia (NASDAQ:NVDA) sell-off. The future of Nvidia stock is uncertain, but a prominent hedge fund holds a bearish view.

Elliott Management, which last year was one of the top 20 most profitable hedge funds on Wall Street, has reportedly laid out its own bear case for shares in the AI chip market leader.

Although the fund hasn’t disclosed holding a short position in the stock, given the fund’s high reputation Main Street and Wall Street investors alike may be buying into Elliott’s argument, by selling or going short Nvidia shares.

Elliott Management is free to voice its opinion. The fund’s sterling reputation precedes it. However, we believe this to be one of the rare situations where the fund has it all wrong.

Nvidia Stock and Elliott Management’s Warning to Investors

According to a scoop published by the Financial Times on Aug. 2, Elliott Management, in a private client letter to its investors, presented the hedge fund’s downbeat view on the generative artificial intelligence trend.

It called out NVDA shares in particular. Stating that NVDA is in “bubble land,” Elliott presented a twofold bear case largely in line with other NVDA skeptics.

First, the fund believes that Nvidia’s AI chip sales growth is not sustainable.

At some point, Big Tech will ease its purchasing of high-performance GPUs as part of its AI build out efforts. Second, Elliott also believes that AI bulls are overestimating the number of use cases for GenAI.

Per Elliott, if, not when, the company’s growth begins to underwhelm, this will “break the spell,” sending Nvidia stock to considerably lower prices.

This latest headline comes amid rising pessimism about Nvidia and AI stocks in general. It’s unclear how much impact the Elliott news has by-itself had on NVDA’s price performance.

However, if you’re putting in a sell order as you’re reading this, take note. Before following the lead of investors ranging from Elliott’s institutional clients to retail traders, consider the following counterargument to this bear case.

NVDA’s Three-Step Path to Higher Prices

Only time will tell whether “AI mania” has peaked, or if it finds more runway. Yet while the fate of other AI stocks may be questionable, we believe that there’s still a three-step path for Nvidia stock to both hit new highs. Not to mention, prove wrong Elliott and the other skeptics.

First, it may be overstating it to say that NVDA is in “bubble land.” The GenAI boom took shape in early 2023. Since then, shares have surged by more than sevenfold.

However, earnings have gone up nearly tenfold during this time frame. In FY2023, Nvidia’s earnings came at 18 cents per share. Over the trailing twelve-month period, reported earnings have totaled $1.73 per share.

Second, take a look at recent updates regarding the Magnificent Seven’s AI infrastructure expansion efforts. Clearly, Big Tech’s AI spending spree isn’t slowing down anytime soon.

Meanwhile, the rollout of AI-PCs and other consumer-facing AI-compatible devices could mean further growth in chip demand in the years ahead.

Third, taking into account steps one and two, there is a path for shares to quickly re-hit their past high-water mark, and then some. All it may take is for Nvidia to meet current forecasts.

Bottom Line: Don’t be Swayed

Per the latest sell-side forecasts, Nvidia is expected to report earnings of $3.72 per share in the fiscal year ending January 2026.

Merely hitting this estimate, while maintaining its current valuation of around 39 times earnings, could mean a fast trip up to $145 per share. That’s a few dollars above NVDA’s split-adjusted all-time closing high.

And if Nvidia beats these forecasts? Far loftier price levels may be within reach. After all, some sell-side forecasts call for Nvidia’s earnings to top $5 per share next fiscal year.

While not for certain, achieving such a further jump in profitability may be enough to justify a move to $200 per share.

With this still-strong bull case in mind, there’s no need to be swayed by Elliott’s possibly-shortsighted view. Instead, feel free to hold onto Nvidia stock. Consider any additional weakness as further opportunity to buy.

Nvidia stock earns an A rating in Portfolio Grader.

On the date of publication, Louis Navellier had a long position in NVDA. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.

The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.