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Exclusive sources report an alleged drop in demand
Some analysts lower price targets for chipmakers
Price in too much growth? NVIDIA stock weakens
NVIDIA stock could not be slowed down in recent years on the stock market: the graphics card company based in Santa Clara (California) was able to exceed even the wildest expectations of analysts almost every quarter, the price of the stock kept surging. NVIDIA is extremely well positioned in many megatrends such as self-driving or gaming, and the market has so far forecast huge growth over several years. Analyst CJ Muse recently caused a stir by ranking NVIDIA as “probably the most valuable 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: is the company’s rapid growth really set in stone?
Investment firm Truist reports lower demand for semiconductor products
Last week, a report by the American investment firm Truist caused a large drop in prices in the semiconductor industry. As reported by Seeking Alpha, Truist says he has “credible evidence of contract reductions.” Truistic analyst William Stein spoke of a “sudden and negative change” in the demand situation, which will be reflected in the order situation of semiconductor manufacturers in the coming months. He received exclusive information on the order cuts from two experts in the semiconductor industry. The exact reason was not given. The worst thing for the semiconductor industry would be a general drop in demand due to market saturation, while a short-term downturn due to temporarily full inventory would be more manageable.
Either way, Stein is bearish for NVIDIA and Co. in the near future: although the analyst expects still strong numbers for the first quarter and possibly also for the second quarter of this year, growth will slow significantly in the second half of 2023. . Investors reacted to this news with uncertainty and increasingly hit the sell button – 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 to a purchase warning for its customers. The analyst also lowered its price targets for the world’s three biggest chipmakers: NVIDIA from $347 to $298, AMD from $144 to $111 and Intel from $53 to $49. Truist isn’t the only analyst firm to lower its price targets for semiconductor stocks. Tristan Gerra of investment bank Robert W. Baird also cut his NVIDIA price target dramatically from $360 to just $225. According to Seeking Alpha, Gerra justified his revaluation on the decline in consumer interest in graphics processors due to “excessive inventory”. Interestingly, Gerra sees the upcoming “hard fork” (split in the blockchain due to conflicting plans by crypto programmers) of the cryptocurrency ether as a possible reason for further “low demand intensification” for cryptocurrency. graphics processors, which NVIDIA, as the world’s largest graphics card maker, particularly affects would be. In addition, the demand for computers is down and Western sanctions against Russia do not leave NVIDIA indifferent. Like Stein, Gerra also assumes that after a strong first quarter of 2022, NVIDIA will initially no longer achieve the growth rates of recent 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 performance of stocks, it’s no wonder: while NVIDIA shares were worth less than $75 before the corona pandemic, they reached their previous high of $346.47 on November 22, 2021. Thanks to this stock market development, the graphics card maker is now one of the largest companies in the world with a market capitalization of more than 500 billion US dollars. However, in recent months NVIDIA has not been able to match the successful performance of the past year. NVIDIA shares are currently trading at $222.03 on the NASDAQ (closing price: April 13, 2022), an all-time high over 30%. After all, NVIDIA is still up over 45% over a 12 month period. If you follow Baird’s analysis, the recent weakness in NVIDIA stocks may have company-specific reasons in addition to the general weakness in technology stocks due to interest rate hikes in the United States – especially more than NVIDIA continues to trade with a price/earnings ratio well above 50 despite the setback rated very ambitious.
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