Nvidia (NASDAQ:NVDA) is looking more and more like a Tesla (NASDAQ:TSLA) on the stock market. The enamor investors had over the CEO is at an end, for a good reason. For two straight quarters, Nvidia reported weaker GPU sales and warned that an inventory glut would hurt sales. Similarly, Tesla reported higher losses and lower sales. Of the two, Nvidia has a better chance of winning back investor confidence.
In the last earnings report, Nvidia said inventory levels improved, although they are still unfavorable. Data center sales are weak in the current quarter as customers delay big orders. On the charts, NVDA stock could re-test the $124.46 lows last reached in Jan. and Feb.
At the macro level, the ongoing U.S-China trade war could delay Nvidia’s takeover of Mellanox (NASDAQ:MLNX). Nvidia filed for China’s approval on May 21. Fundamentally, the unit will benefit from having Nvidia-powered GPUs and could take market share from Intel (NASDAQ:INTC). Notable is the HGX-2 system, which are serial co-processors to the GPU complex. Ultimately, customers will want the best technology available and the Nvidia-Mellanox combination will fit the bill.
Your Takeaway
Nvidia trades at 24 times earnings and around 20.5 times forward earnings. At these levels, the stock is compelling but could fall even more, creating a better entry point.
