Nvidia Stock Update
Nvidia’s stock has seen a drop of over 7% since it announced its quarterly revenue on August 27th, even though the company’s stock has appreciated 25% annually.
The chip manufacturer, known for its work in artificial intelligence, greatly benefited from the surge in generative AI following the release of ChatGPT. In 2024, its stock soared 171%, marking it as one of the standout performers of the year.
This year, Nvidia encountered various struggles, such as tariffs, impending export restrictions from the US on advanced chips, and an overall uncertain technology market.
Some of these pressures have started to lighten. In August, Nvidia secured a contract with the US government and resumed selling in China, albeit at a reduced rate of 15%. This compromise opened up significant demand channels for the company.
However, new challenges are surfacing, with at least one analyst adjusting the stock’s target downwards.
Nvidia remains a key player in the AI sector, with its revenue continuing to grow. CEO Jensen Huang has emphasized the strong demand for Blackwell, Nvidia’s latest graphics processing unit (GPU) architecture.
Huang noted in a press release on August 27th, “Production of Blackwell Ultra is accelerating, and demand is incredible. The AI race has commenced, and Blackwell is central to that.”
Despite this, Nvidia missed its second-quarter revenue estimates for the data center segment, which impacted the stock’s performance.
For its second quarter, Nvidia reported earnings of $1.05 per share, slightly above the Wall Street expectation of $1.01. Revenue increased by 56%, reaching $46.744 billion, exceeding analyst predictions of $46.06 billion.
In a memo released on Monday, City analyst Atif Malik reduced Nvidia’s price target from $210 to $200 while maintaining a buy rating.
Malik expressed that Nvidia’s leadership in the AI chip market faces increasing competition, particularly from companies like Broadcom, which recently reported strong quarterly results and announced a $10 billion order for their next-generation custom accelerator, XPU.
While Malik believes that GPUs will still dominate the AI computing market, capturing over 85% of sales, he predicts that the XPU market will experience rapid growth through 2026, expanding by 53% compared to a 34% growth forecast for AI GPUs.
Citi estimates that Nvidia’s GPU sales could be about $12 billion lower than anticipated for 2026, including a $2 billion reduction from Meta, which would effectively reduce its previous $232 billion forecast for GPU sales in 2026 by approximately 5%.
- If Nvidia loses market share, this may apply pressure on its stock.
- If the adoption of new platforms slows, this could influence its data center and gaming sales.
- Volatility within the automotive and data center markets might contribute to inventory fluctuations.
- Cryptocurrency developments may also impact gaming sales.
Malik added a note of caution, stating, “Our estimates do not factor in the potential resumption of GPU shipments to China, which could significantly influence the market.”
Nvidia’s stock closed at $168.31 on September 8th. Citi anticipates that Huang’s keynote during the upcoming GTC event on October 28th could be pivotal for the stock’s trajectory.
