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The analyst is concerned about order cancellations related to the consumer GPUs, as well as excess inventories, a slowdown in consumer and PC demand, and the Russian sanctions.
“While Nvidia sells at MSRP, pricing declines in GPUs post a pricing peak mid last year reflect on weakening demand, to the point where orders are now being impacted. Importantly Nvidia is not cutting wafer/substrate orders so far, as Nvidia has been supply restricted for the past 1.5 years and as data center demand remains very strong,” Gerra said in a client note.
Moreover, he argues that the demand weakness could increase in the light of the Ethereum fork that is expected this year.
The Ethereum fork expected late 2Q/early 3Q would compound the weakening demand trends, as it would result in a significant increase in graphic cards on the second-hand market, pressuring pricing further and likely reducing orders at least until the ramp of the GeForce RTX 40 series gains momentum (not until C2023). During the 2018 peak, mining represented as much as 40% of total consumer GPU demand based on supply chain estimates,” the analyst added.
The analyst also added that investors are underestimating the impact of Russia on Nvidia as this area “likely represents a larger percentage of consumer GPU than the consensus view.”
A new price target on Nvidia stock is $225.00 per share, down from $360.00.
By Senad Karaahmetovic
