Based on industry checks with those in the know, Baird's 5-star analyst Tristan Gerra notes that consumer GPU inventories are on the rise. This spells bad news for GPU leader Nvidia (NVDA).
Demand weakness in Asia appears to be one of the culprits and to an extent so is the embargo on Russia shipments. Additionally, in anticipation of Ethereum’s migration from Proof of Work to Proof of Stake, miners appear to be selling hardware.
March saw a month-over-month price drop of 25% for consumer GPUs, with prices now 25% above historical levels. This brings the pricing back to levels last seen at the beginning of 2021. This is below the 80%+ premium over the MSRP (manufacturer’s suggested retail price) of a quarter ago and some way off May 2021’s more than double the MSRP for GPUs. The prices for Nvidia's RTX 3080 series are also declining.
“While Nvidia sells at MSRP and would not be impacted by the price declines, current ASP trends reflect softening demand as card availability improves. Based on our checks, we note no shortages of graphic cards in the Asia markets," says Gerra.
With regards to the sale of GPUs intended for Ethereum mining, Gerra says it is hard to tell what the percentage of cryptocurrency mining is compared to total consumer GPU demand. At the 2018 cycle peak, it was thought to be as high as 40% of the mix. Gerra anticipates miner selling dynamics will “worsen” in C2H22.
Additionally, over the past three months, graphic card resellers’ revenue has been “tracking below” normal seasonality, down more than 20%, which compares unfavorably to the low single-digit decline usually seen during the same period.
Providing some succor, data center demand “remains strong and will continue to be an offset near term.”
For now, Gerra stays with the bulls, reiterating an Outperform (i.e., Buy) and $360 price target on NVDA shares. This figure conveys his confidence in NVDA's ability to rise ~24% in the next twelve months. (To watch Gerra's track record, click here)
Most analysts are reading from the same manual; based on 21 Buys vs. 5 Holds, the stock claims a Strong Buy consensus rating. Going by the $350.22 average target, investors will be sitting on returns of 24% a year from now. (See Nvidia stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.