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As of the position just published, Nvidia's 's stock price fell 9.2% today. The sharp decline in stock prices is accompanied by the general pain of the stock market. Nasdaq comprehensive index is also declining simultaneously.
Another wave of selling occurred after Feder decided to raise interest rates by 0.5% last week. The Fed is trying to cool down inflation, but there are growing concerns that central bank is catching up, and its aggressive rate hikes may lead to a recession.
Nvidia has no specific financial news that caused the stock to fall within a day. However, last week it was reported that SEC (SEC) would charge the company a $5.5 million fine. The fine is related to the SEC's claim that Nvidia failed to fully disclose the extent to which it was affected by the cryptocurrency boom and bust in 2018 and 2019. Graphics Processing Unit (GPU) is used to mine some cryptocurrencies such as Bitcoin and Ethereum .
Nvidia has a market capitalization of over $430 billion, and a $5.5 million fine is nothing to Nvidia, but perhaps the concerns about the SEC's exercise of such powers have led to the stock's poor performance today. Additionally, some reports show that demand for video game GPUs, often favored by crypto miners, is starting to weaken. Earlier, some analysts reported that consumer spending on devices began to slow after the pandemic-induced shopping spree on all consumer technology products lasted for two years.
More than 40% of Nvidia's revenue is classified as video game-related sales.
Nvidia will announce its first quarter financial results on May 25. In the last earnings update a few months ago, CEO Jensen Huang and the company said revenue is expected to grow 43% year-on-year. After a sharp sell-off in the past six months, Nvidia stock is now trading at 54 times the price of free cash flow in the past 12 months.
lengthens the timeline. Nvidia has fallen by more than 40% so far this year, and has fallen by hundreds of billions of dollars compared with the peak of more than 800 billion US dollars.
but Morgan Stanley analyst Joseph Moore wrote: "Nvidia remains one of the best growing companies in the semiconductor field and is a core holding company." For this reason, the analyst said Morgan Stanley's approach would be "at least maintain the market weight of the stock and look for points to increase." In other words, Moore seems to say here that under no circumstances will Morgan Stanley consider rating Nvidia as Sell.
Moore noted that Nvidia has established a "strong, differentiated cloud [ Artificial Intelligence /Machine Learning] leading position in business and gaming." That being said, the gaming business does raise some concerns.
Moore said that the recent game data looks "stable", and in the long run, analysts said he is optimistic about Nvidia's "prospects and market positioning." However, he does predict a slowdown in gaming revenue, “this will lead to moderate challenges in 2023” – only in part due to Nvidia’s strength in selling server chips to data centers.
so many businesses. Now let's consider the stock price. Nvidia's current sales and earnings continue to grow, but even so, "revenue growth may be partially offset by multiple compressions", especially as inflation and interest rates rise and investors are reluctant to make it far away. This could prove that there is a problem with Nvidia stock, which sells for "higher than everything else".
According to Moore's calculations, Nvidia stock's earnings for the current year are 38 times and its earnings forecast for 2023 is 32 times. (The stock has a higher P/E ratio of 48 times based on record earnings). So even the most generous measure of profitability requires Nvidia to achieve and maintain a 32% long-term profit growth to maintain a PEG ratio of 1.0 – and a 32% long-term growth may be problematic.
is partly due to the fact that these multiples are already so high that “the stock has been sideways since the broader high-growth tech stock sold off earlier this year.” But the second reason for Nvidia’s recent underperforming performance is that the gaming business is expected to slow down this year.
As the pandemic ends, government relief is exhausted, Americans return to their offices to work, and the time and money spent on gaming and gaming hardware will be reduced, which will curb GPU sales all the time. Furthermore, recent weakness in cryptocurrency prices is hurting demand for Nvidia GPUs that have been repurposed for cryptocurrency mining, putting the industry-wide quarterly [graphic chip sales] at risk.
With these concerns in mind, Moore currently gives Nvidia an equal weight (i.e., hold) rating with a target price of $217. However, analysts themselves admit that the rating of “equal weight” is as low as the rating Morgan Stanley is preparing to give Nvidia.
others on Wall Street are more optimistic than Morgan Stanley. There have been 21 buys and 6 holds over the past three months, making NVDA a strong buy. The average target price is $331.14, with an upside potential of about 68%.
GPU price continues to decline brings risks
GPU prices have been steadily declining since the beginning of 2022 and are now at the lowest price we have seen since the start of the GPU shortage. According to 3DCenter, both Nvidia and AMD graphics cards have already sold GPUs about 10% higher than the suggested retail price this month in Germany.
More specifically, according to the 3DCenter price chart, the Nvidia RTX 30 series graphics card price is already 114% higher than the MSRP. The AMD RX 6000 Series GPUs have even dropped to 107%, giving many reference or low-end AIB partner cards the same value as high-end AIB partner cards at the suggested retail price.
in the past two months means the price has begun to remain flat, with monthly price deflation below 10%. Until April, GPU prices have been declining at 10% or more per month since the beginning of 2022.
If we continue to follow this downward range, we will soon see that the GPU price returns to normal.
To measure pricing for each model, Voodoo2 SLi on Reddit breaks down the full pricing of AMD RX 6000 series GPUs and Nvidia’s RTX 30 series graphics cards, which we list below. The price does take into account VAT of 19%; however, we have converted to USD and VAT-excluding prices.
As evidenced by the pricing above, some SKUs still suffer from severe markups such as the RX 6800, RX 6800 XT, RTX 3070, and RTX 3060 Ti. However, several other graphics cards including the RTX 3080 Ti, RX 6900 XT, RX 6600 XT, RX 6500 XT and RX 6400 have a suggested retail price or less.
This indicates that the supply or demand for some cards is much greater than that of others. Especially in the mid-range market where the biggest losses are suffered. It's almost impossible to find inventory anywhere, including the U.S. market, cards like the RTX 3070 and RX 6800.
But thankfully, the price continues to fall across the board, and as Ethereum prices continue to fall, we should see this trend continue. Unfortunately, prices have not yet fallen, and Nvidia and AMD are about to launch their next-generation GPUs.
*Disclaimer: This article is original by the author. The content of the article is the author's personal opinion. The reprint of the Semiconductor Industry Observer is only to convey a different view, and does not mean that the Semiconductor Industry Observer agrees or supports this view. If you have any objections, please contact the Semiconductor Industry Observer.
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