Nvidia shares continue to fall in reaction to weakened outlook for AMD sales. Is the time now ripe to buy the dip?

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Nvidia shares have experienced mounting losses in recent weeks as markets experience a slowdown in fundamental business outlook indicators. AMD’s Computing and Graphics segment has also witnessed a sharp decline in earnings in the Q3, and registered an increase in inventory volumes.

According to AMD, the decline in sales is mainly due to an anticipated decrease in demand for graphics chips on the part of cryptocurrency traders. AMD’s Computing and Graphics revenues have dropped by $100 million in the Q3 alone. Investor attention is now turning towards AMD’s primary competitor, Nvidia, which is posed to release its Q3 earnings after the closing bell on Nov. 15th, 2018. Should Nvidia publish a worse than expected outlook for the upcoming quarter, this will confirm market fears of worsening conditions in the semiconductor sector. Yesterday, Bank of America Merrill Lynch further validated investor reluctance by lowering the target price for NVDA stock on their ‘Buy’ recommendation from $360 to $300. The decline was mainly explained by the market’s oversaturation with graphics cards, which is expected to last for the next several quarters. Nevertheless, Nvidia remains in their opinion one of the most attractive stock titles in the semiconductor industry, due mainly to the company’s unique position in key growth areas, such as artificial intelligence, autonomous cars, and the videogame industry. Goldman Sachs analysts also mark the recent decline in Nvidia stocks as an opportunity to buy, setting a target price of $305 per share which represents a gain of 53% from the present values.  In their opinion, next year Nvidia will be able to capitalize on a new generation of graphics cards built on so-called “Turing architecture,” which will significantly boost mid- and long-term revenue in the videogame sector. C.J. Muse of Evercore offers by far the most optimistic outlook, expecting a target price of $400 per share. “We view Nvidia as being on the cusp of a tipping point in the company becoming the AI standard platform,” observed the analyst. Nvidia’s artificial intelligence technologies may be found not only in video games, but also in the healthcare field, as well as in autonomous cars.

Nvidia shares have fallen 29% from the beginning of October to $198.29, but have still recorded roughly 2.5% in gains YTD. After recent sell-offs the S&P 500 has lost 2% YTD.

Photo by: BagoGames

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