NVIDIA Corporation (NVDA) Falls As Wells Fargo Downgrades To Underperform

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Wells Fargo has a $30-$36 price target range on Nvidia’s stock

NVIDIA Corporation (NASDAQ:NVDA) shares fell by more than 1% in pre-market today after investment firm Wells Fargo downgraded its rating to Underperform from Marketperform. The firm keeps a price target range of $30-$36 on the stock.

Wells Fargo analyst David Wong attributed his rating change on an increasing competitive environment for Nvidia. The analyst noted that Nvidia could lose a significant portion of its graphic processor sales to Advanced Micro Devices, Inc. (NASDAQ:AMD) and of coprocessors to Intel Corporation (NASDAQ:INTC) as both companies gain strong momentum.

“Despite having apparently peaked in unit graphics market share some quarters ago, Nvidia’s gaming GPU revenues have continued to show good growth, in the 17-58% year/year range in each of the last 4 quarters (July 2015 through April 2016)” said Mr.Wong. The analyst added that the primary reason for this is Nvidia’s leadership position in the graphics market. However, at the same time Mr. Wong noted that AMD is increasingly gaining up to Nvidia with a host of new product offerings. The analyst projects that AMD during the second half of this year will regain some share in the graphics market. Mr. Wong points out that AMD’s 14nm Polaris would allow the company to snag a significant share of the high volume mainstream portion of the graphic card segment.

Mr.Wong further noted that Nvidia is stepping up its game in coprocessors by reaching further than the HPC segment to accommodate advanced functionality such as machine learning and AI infused cloud platform. The analyst is of the opinion that Nvidia has the capacity to expand its coprocessor segment in the long run hoever highlights that Intel ramping up its business may halt some of Nvidia’s momentum in the coming quarters. According to the analyst, Knights Landing product line would allow Intel to regain a certain portion of the HPC coprocessor segment.

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