The former forward has, however, backed the Frenchman to get 15-20 goals this season.
The French forward has come under extreme scrutiny so far this season, with many arguing he is not the high-calibre striker the Gunners need to fire them to the title.
He has not had a good start to the season, either, having scored just once in seven appearances for the side in all competitions.
With Theo Walcott vying for a central role this season, then, Nicholas has urged Arsenal to drop the Frenchman in favour of the pacy forward.
"Giroud hasn't been in good form and that's why I'd pick Walcott ahead of him against Stoke," Nicholas told Sky Sports.
"When he's on form you see him getting in behind people, taking shots early but I don't see him doing any of that so far this season. I would leave him on the bench and simply say to him: 'it's up to you to respond well to this criticism’."
Giroud still good enough for 15-20 goals
Many had hoped that manager Arsene Wenger would sign a striker to bolster his forward line this summer, with Real Madrid striker Karim Benzema being someone supporters would have loved to see at the Emirates.
A signing never materialised, though, with the Gunners being suspiciously quiet as they became the only side in Europe’s top five leagues not to sign an outfield player.
Despite criticising Giroud, though, Nicholas has backed him to get 15-20 goals this season, and believes back up from Walcott and Sanchez would help Arsenal have a successful season.
"Giroud was never going to be the player who is going to win you the title but he's one of the players who could help you win it," added Nicholas.
"This season I still expect Giroud to score 15 to 20 league goals. If Walcott stays fit I'd expect him to score 15-20 league goals, too. Combine both of them with Sanchez and others then Arsenal should do ok."