Nomura Gets Cautious on NVIDIA Corporation (NVDA), Urges Investors to Instead Buy Intel Corporation (INTC) Shares

NVIDIA Corporation (NASDAQ:NVDA) shares are currently dipping almost 4% on the heels of Nomura analyst Romit Shah sounding the alarm on the chip giant. Pinpointing underlying concerns with the gaming sector, the analyst downgrades NVDA from a Buy to a Reduce rating while reigning in the price target from $100 to $90, which represents a just under 16% downside from where the stock is currently trading.

Not only does Shah recognize a deceleration occurring in the sector, he indicates consensus is not giving enough credence to the warning signs. “We believe consensus is underappreciating a slowdown in gaming and the potential negative impact to the multiple. We recommend investors take profits and rotate into Intel (INTC/Buy),” advises Shah. Though Intel Corporation (NASDAQ:INTC) investor confidence has not been at a high on back of a rocky analyst meeting, Shah in fact sees more upside for INTC shares than for NVDA shares.

Moreover, the analyst opines, “We believe datacenter and automotive will be solid long-term growth drivers, but the implied value that the market is ascribing to these emerging businesses is unsustainable”

For those who continue to be bullish on the stock, Shah warns, “In addition to a significant premium to comps, investors should recognize that the market’s enthusiasm for Nvidia’s emerging businesses is historically short-lived.”

In a see-saw of momentum, where market sentiment tends to rock on a back-and-forth pendulum regarding the giant’s businesses, the analyst sees gaming business as the crux of whether the Street turns confident or pessimistic on NVDA, deeming it a “lock-step” dance. “In other words, we’ve found that when gaming exceeded expectations, the market assigned higher value to Nvidia’s emerging businesses, resulting in multiple expansion. Conversely, when gaming contracted, we believe the market became less enthusiastic, resulting in multiple compression,” Shah concludes, determining “gaming has more downside risk this year.”

As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance According to TipRanks, five-star analyst Romit Shah is ranked #180 out of 4,494 analysts. Shah has a 64% success rate and earns 14.2% in his annual returns. When recommending NVDA, Shah gains 38.1% in average profits on the stock.

TipRanks analytics indicate NVDA as a Buy. Based on 28 analysts polled by TipRanks in the last 3 months, 15 rate a Buy on NVIDIA stock, 10 maintain a Hold, while 3 issue a Sell. The 12-month average price target stands at $115.78, marking a nearly 5% upside from where the shares last closed.

  • tom mango

    Fundamentally wrong! John Peddle Research ( contradicts any gaming decline. “Gaming PC segment, where higher-end GPUs are used, was once again the bright spot in the overall PC market for the quarter.” AMD and NVDA both gained market share Intel lost. CPU market is Intel’s cash cow and for the first time in a decade they have lost tech advantage to AMD. AMD Ryzen CPU’s are already best selling CPU’s on Amazon, They outperform Intel and are priced at 50% of Intel. AMD will make a similar play to assault Intel’s lucrative server monopoly later this year. NVDA has near monopoly on high end graphics and AI training processors and the only near term challenge can come from AMD. NVDA currently has a significant lead in GPU and AI that will certainly continue in AI and can only be challenged in GPU by AMD Vega due out later this year. NVDA is the technology leader and will introduce exciting new products soon. AMD has caught Intel asleep at the wheel. Intel will most likely suffer humiliating declines in key margin producing markets.

  • Yelena Gordiyenko

    My only regret is that I don’t have more money to invest in NVDA right now. I really hope its asking price drops to $70 so I can buy more shares.

    • luke

      I wonder what you will still say that after next week when AMD announce VEGA.

      Looks to me like the performance was leaked this morning going by NVIDIA stock price.

      • Andrew Brian Evagelou

        Stop hyping Vega. It is looking like it might disappoint. Only marginally better performance than Nvidia’s GTX 1080. Nvidia still has the full GP102 die that it can release, not even mentioning a cut down (or even full) GP100 chip.

        • luke

          AMD have already stated they are targeting Nvidia next Volta GPU with Vega. Pascal will not be able to match big Vega.
          But you know, if you are happy with second best, stick with Nvidia in 2017.

  • Shaun Lamont

    Romit Shah has no idea whats he’ s talking about…Nvidea is going to be massive…all those games and VR…and those industrial VR applications…all using GPU’s…
    Nvidea is worth $200 at least