- An industry expert predicts that chip prices will continue to drop.
- A downturn in the industry may impact the company’s short-term financial performance.
- Nvidia has a bright future if one looks at the company over several years rather than quarterly.
As selling pressure mounted, Nvidia (NASDAQ:NVDA) stock fell as high as 3.1% on Tuesday morning. The stock price was down 2.1% at 12:16 p.m. ET.
The chipmaker was likely swept up in the market downdraft, but a Wall Street analyst’s pessimistic comments didn’t help.
Chris Danely, an analyst who specializes in the semiconductor industry for Citigroup, thinks that shares of chipmakers have further to go before they reach the bottom. Analysts’ expectations have decreased “for the first time since the pandemic,” he said, because of slowdowns in the handset and PC sectors.
The analyst also notes that the automobile and industrial sectors appear to be bottoming out. Danely said in a message to clients, “We continue to believe we are entering the worst semiconductor downturn in a decade given the recession and inventory build.”
So, “we predict the SOX [semiconductor] index to hit new lows and tumble another 25%,” he said, “since every company/end market will correct.”
After this, what?
There have always been boom and bust periods in the semiconductor business. Nvidia (NASDAQ:NVDA) stock is down almost 53% from its high point last year due to fears that the industry is about to enter the trough of that cycle.
Long-term investors need to consider Nvidia (NASDAQ:NVDA) 2017 financials to predict the company’s future performance. Revenue for Nvidia’s fiscal 2022 (which ended on January 30) hit a record $26.9 billion, an increase of 61% year over year, thanks to robust results in both the gaming and data center markets.
Extreme gamers almost universally prefer GPUs powered by Nvidia (NASDAQ:NVDA). Likewise, its CPUs are a must-have for any severe cloud service. Despite its current supremacy, the tide will eventually shift against the company.
Currently, the Nvidia (NASDAQ:NVDA) stock is trading at a lower than 12 times the expected sales for the upcoming year, which is significantly lower than the five-year average price-to-sales ratio of 17. Nvidia is a current steal, even though the stock could fall more.
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