Markets punished omniverse chip supplier Nvidia (NVDA) in the last month. The stock lost one-fifth of its value after admitting it had excess graphics card inventory. NVDA stock held $180 in the summer only to bottom at $140.
The small rally in the last week may not hold. The stock trades at double the price-to-earnings-to growth (or PEG) ratio than that of AMD stock. Nvidia’s stock price is dependent almost entirely on the general market sentiment. For now, markets are still euphoric. Speculators bet that technology companies will lead markets on growth.
The Fed-induced economic slowdown will continue to hurt PC gaming depend. Companies will cut spending on GPU-powered central servers in the near term. At a nearly 50x P/E, the market risks compressing this multiple by 20% or more. That would imply a price target of below $100 for Nvidia stock.
Nvidia’s fundamental growth is slowing this quarter. The firm has pricing power for the mainstream RTX 3060. It heavily discounted the 3080 and 3090 top-end products. When it introduces the 4090 at nearly $2000 a unit, gamers will have limited choices. Power-builders in the consumer space will choose Nvidia. This assumes that AMD’s RX 7000 products will not match that offered by Nvidia.
