Key points:
- NVDA shares have sold off over 13% in the last week, trading down a further 4% this morning
- Macro concerns coupled with a reaction to the Fed are leaving tech stocks overexposed
- Truist and Baird analysts downgrade NVDA on a worrying dip in consumer demand
Tech stocks are under pressure from growing uncertainty, wider market rotations and the ongoing battle to beat inflation by hiking interest rates. The Nasdaq sold off heavily last week on news from the Fed regarding a reduction of its balance sheet, and large growth companies are under fire. Nvidia has made a name for itself as the ‘chip giant’; the growing need for chips and semiconductors has propelled Nvidia into investor focus, but recently, the stock keeps on extending its downside.
NVDA shares dropped by around 4.5% on Friday, with shares currently down a further 4% in Monday premarket trading. Whilst macro concerns are weighing on the stocks growth, there have been multiple analyst updates that point to equally important issues.
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On Friday, Truist analyst William Stein lowered the firms price target to $298 from $347, citing what he deems “hard evidence” of a sudden negative shift in consumer demand across multiple verticals. Despite the negative update, Stein maintains his Buy rating on the shares on the grounds of a wider Semiconductor thesis, also stating that any downgrade is “challenging”.
Today, there’s been further reason to question the chip giant after a consecutive downgrade from Baird analyst Tristan Gerra; lowering the firm's price target to $225 from $360, and from Outperform to Neutral. Gerra again points to rising order cancellations following excess inventories, a dip in consumer and PC demand, as well as the cuts from the Russian embargo. The analyst sees a peak in annualized revenue comps in FH22.
It’s undoubtedly a precarious time for high-growth tech companies that rely on strong valuations. Selling pressure is strong amongst companies like Nvidia, and the chances of a further downside are likely.