NVIDIA Corporation’s (NVDA) stock price has dropped 10% in a week after the company reported impressive quarterly results with 94% year-over-year growth in sales. The decline is attributed to profit-taking, concerns over a potential China trade war and its impact on the company’s supply chain, as well as lower server sales forecasted by major customer Dell Technologies.
Despite the decline, some analysts, including Jim Cramer, remain optimistic about NVIDIA’s prospects. They point out that the company’s strong numbers and growing demand for AI products are promising. However, concerns over a slowdown in growth rate and increased competition from companies like Amazon are also being taken into account.
NVIDIA reported sales of $35 billion, with its data center business surging 112% due to robust AI demand. The company forecasted revenue of $37.5 billion for the fourth quarter, which is slightly lower than analysts’ average estimate. However, this slowdown in growth rate marks a change from previous quarters where sales rose 122%, 262%, and 265%.
The potential impact of a China trade war on NVIDIA’s supply chain is also a concern. President-elect Donald Trump announced plans to impose big tariffs on goods coming from China, Canada, and Mexico, which could affect the company’s ability to meet demand for its semiconductors.
While some analysts believe that the direct impact of these new tariffs will be small, others warn that escalation remains a larger potential worry as overall semiconductor imports might be affected by more broad-based actions. Meanwhile, Dell Technologies’ forecasted lower server sales may also contribute to NVIDIA’s stock decline.
Despite these concerns, Jim Cramer believes that nothing is wrong with NVIDIA’s results and that the growing skepticism around the slowing rate of growth is misleading. He points out that Amazon does not offer similar AI products to meet specific needs, which could keep NVIDIA’s revenue up.
However, other analysts remain cautious, citing the potential for increased competition and a shorter runway for growth compared to other AI stocks. As such, some investors may consider alternative AI stocks with more promising growth prospects at lower price multiples.
Source: https://finance.yahoo.com/news/why-nvda-stock-lost-10-044048847.html