Jon Hadad

About the Author Jon Hadad

Jon Hadad graduated from the University of Delaware with a degree in political science. Prior to joining the Smarter Analyst team, he was an industry analyst at a New York research firm.

Will Nvidia (NVDA) Stock Suffer From Losing Tesla?


During Tesla’s Investor Day late last month, the electric-car company took a few swipes at now-rival Nvidia (NVDA) over its chips. Tesla (TSLA) — which to that point was using Nvidia chips for autonomous capabilities — announced it had developed its own, which CEO Elon Musk calls “the best chip in the world.” Musk didn’t hold up, calling it the “best by a huge margin,” and saying it allowed the company to opt for its own over continuing to work with Nvidia. But Nvidia responded saying the comparisons were inaccurate, as Musk should instead be comparing his new system to Nvidia’s DRIVE AGX.

Barclay’s Blayne Curtis isn’t overly surprised by this, saying the “announcement has been a long time coming,” with many investors thinking the “shift already happened.” The analyst estimates sales to Tesla at 6-8% of total revenue, and calls this development a “modest headwind into the July quarter.”

Nevertheless, Curtis remains bullish on Nvidia stock with an Overweight rating and $220 price target, which implies about 22% upside from current levels. (To watch Curtis’s track record, click here)

While Curtis acknowledges that the new Tesla chip is superior to what Nvidia had produced for its cars, he also says that the chip “is aimed at assisted driving, not full autonomous,” instead calling NVDA’s Pegasus Platform as a more apt comparison.

Even with Nvidia losing Tesla, and perhaps now competing with the carmaker, Curtis believes “this is not all negative for NVDA.” He says the “fast pace of [Tesla] development may actually cause more OEMs (automakers) to embrace NVDA solutions as a way to get to market faster.” So while Nvidia lost Tesla, it may make other car companies embrace their technology faster, as a way to better compete with Tesla.

Nvidia was one of Wall Street’s favorite companies for almost three years, as shares surged more than 700% between 2016 and the second-half of last year. But with the chips market recent downturn, Nvidia had fallen 50% towards the end of 2018, before recovering 40% since its 2018-lows. The company continues to be a leader in gaming and self-driving cars, and is expected to be reap the rewards of automakers’ shift to autonomy, while continuing to generate significant income from increased gaming services. TipRanks analysis of 31 analyst ratings on Nvidia shows analysts are betting on this. There is a Moderate Buy consensus, with 19 analysts recommending Buy, ten recommending Hold and two Selling. (See NVDA’s price targets and analyst ratings on TipRanks)

 

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