After markets punished shares of NVIDIA (NASDAQ:NVDA) following its November 15 earnings report, the stock is showing signs of selling pressure easing. Tax-loss selling and expectations for a clearance in GPU inventory could attract buyers again.
At an 18x P/E and a level close to yearly lows, NVIDIA stock may have bottomed for now. Still, market risks, or a broad selloff in stocks, are the only real risks for holding the GPU supplier at this time.
Fundamentally, excess GPUs, notably the 1060 and 1070 GTX models, are slowly clearing from inventory channels. If gamers bought this last-generation cards during the holiday, it would make way for the latest RTX card.
Sales of the RTX model may continue lagging in the first half of 2019, due to a lack of game titles to justify its premium. Electronic Arts (NASDAQ:EA) launched Battlefield V, supporting RTX. The bad news is that initial sales for this game are lagging. Gamers boycotted the title. In the UK, sales of the physical game fell 63% compared to the BF 1 title. With poor sales hurting BF V, Nvidia’s RTX card sales likely suffered.
Takeaway
NVDA stock may have limited downside from here. The stock will not recover until game developers embrace RTX technology, justifying the expensive RTX card upgrade.
