Last week’s bounce in Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD) shares last week, by 12.7% and 9.9%, respectively, could signal a “bottom.” The market had several weeks to price in the weak quarterly guidance. From this point on, investors have near-term catalysts that might help create a trade for these popular GPU suppliers.
AMD’s forward 34x P/E will limit the upside in the stork for traders with a short time horizon. In the holiday season, sales of its Ryzen 2 CPUs could continue with a strong follow-through in 2019. AMD’s biggest headwind is still Intel (NASDAQ:INTC). At a $47 - $49 last week, the market expects the Core i3, i5, i7, and i9 CPUs will all do well against AMD. AMD may have a technological lead but Intel sells better performance chips for the gaming sector.
Nvidia’s historically strong growth rate is on pause for the next three quarters due to excess inventory for GPUs. At a forward P/E of around 23 times, bottom fishers will bet the stock will make another run back to $200. If sales of its mainstream GPU do well during the holidays, that would position Nvidia to ramp up RTX 2080 production in early 2019.
