Exclusive sources report an alleged drop in demand
Some analysts lower price targets for chipmakers
Priced in too much growth? NVDIA stock weakens
The NVIDIA share could not be slowed down in the past few years on the stock exchange: the graphics card company based in Santa Clara (California) was able to exceed even the wildest expectations of the analysts almost every quarter, the share price kept jumping. NVIDIA is extremely well positioned in many mega trends such as autonomous driving or gaming, and the market has so far priced in enormous growth over several years. Analyst CJ Muse recently caused a stir when he ranked NVIDIA as “possibly the most important technology company” in the world. But now two analyst reports are causing great concern among NVIDIA shareholders. More and more analysts and investors are asking themselves: Is the company’s rapid growth really set in stone?
Investment firm Truist reports slump in demand for semiconductor products
Last week, a report by the US investment company Truist caused a broad price decline in the semiconductor industry. As reported by Seeking Alpha, Truist says it has “credible evidence of contract cuts.” Truist analyst William Stein spoke of a “sudden, negative shift” in the demand situation, which will be reflected in the order situation for semiconductor manufacturers in the coming months. He received exclusive information about order cuts from two experts in the semiconductor industry. The exact reason has not been given. The worst thing for the semiconductor industry would be a general drop in demand due to market saturation, while a short-term slowdown due to temporarily full inventory would be more manageable.
In any case, Stein is bearish for NVIDIA and Co. for the near future: Although the analyst expects continued strong figures for the first quarter and perhaps also for the second quarter of this year, growth will cool off significantly in the second half of 2023. Investors reacted with uncertainty to this news and increasingly clicked on the sell button – the shares of NVIDIA, AMD and Intel fell several percent to the south.
Baird also lowers price targets for semiconductor stocks
Stein linked this new information with a purchase warning for his clients. The analyst also lowered his price targets for the world’s three largest chip manufacturers: NVIDIA from $347 to $298, AMD from $144 to $111 and Intel from $53 to $49 -Dollar. Truist isn’t the only analyst firm downsizing its price targets for semiconductor stocks. Tristan Gerra of investment bank Robert W. Baird also significantly reduced his NVIDIA price target from $360 to just $225. According to Seeking Alpha, Gerra justified his reassessment with declining consumer interest in graphics processors as a result of “excessive inventories.” Interestingly, Gerra sees the upcoming “hard fork” (split in the blockchain due to conflicting plans of the crypto programmers) of the cryptocurrency ether as a possible reason for a further “intensification of the weak demand” for graphics processors, which NVIDIA, as the world’s largest graphics card manufacturer, particularly affects would. In addition, demand for computers is falling, and Western sanctions against Russia are not leaving NVIDIA untouched. Like Stein, Gerra also assumes that after a strong first quarter of 2022, NVIDIA will initially no longer achieve the growth rates of the past few years.
NVIDIA stock is currently weakening after a rapid rise in recent years
NVIDIA stock is the darling of many investors. When you look at the stock performance, it’s no wonder: While NVIDIA shares cost less than $75 before the corona pandemic, they reached their previous record high of $346.47 on November 22, 2021. Thanks to this stock market development, the graphics card manufacturer is now one of the largest companies in the world with a market capitalization of over 500 billion US dollars. However, in the past few months NVIDIA has not been able to continue the successful performance of the past year. NVIDIA shares are currently trading at $222.03 on the NASDAQ (closing date: April 13, 2022), a record high is well over 30 percent away. After all, NVIDIA is still up over 45 percent over a 12-month period. If you follow Baird’s analysis, the recent weakness in NVIDIA shares may have company-specific reasons in addition to the general weakness in tech stocks due to the US interest rate hikes – especially since NVIDIA continues to trade with a price-earnings ratio of well over 50 despite the setback rated very ambitious.
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