NVIDIA Corporation has proven itself as a terrific investment. The company makes headway in the markets of superior graphics and AI application processors. Its heightened market stance is well reflected in its share price, too. Last week, investor learned about a threat to the company’s competitive edge. Stocks have been down ever since. The events strongly suggests that shareholders lack confidence in NVIDIA’s capacity to fend off competition. The names that have shaken up shareholders are Tesla Inc. and AMD. NASDAQ:NVDA shares have been an investment haven for a while. In the past, that was enough for bulls to go out of their way defending the stock. Investors understandably have high expectations for a chipmaker of NVIDIA’s caliber. The past 12 months alone represent a stock price increase of 190 percent.
With market uncertainty as rife as it is, and rivals crawling out the woodwork, investors are clearly shaken by last week’s reports.
Threat spooks NVIDIA investors
Again, the corporation that is NVIDIA is great. Chief executive, Jen-Hsun Huang, easily ranks among the most effective business strategists in the high-end technology space. The stock is now primed for perfection and large, steady increases over time. This mostly means good things for NVDA as an investment. There is no doubt that the firm is mining into a rapidly emerging and lucrative market. However, what shareholders are not so sure about is the company’s ability to stop rivals from taking away its dominance. The last few trading days prove that potentially damaging competition is more than enough to spook shareholders.
What is spooking NVIDIA investors?
AMD proved itself as formidable chipmaker this year. The corporation does not only match the products pushed out by market leaders like Intel, but undercuts theirs prices, too. Couple the growing confidence in Advanced Micro Devices with endorsements from the likes of Tesla, and investors notice a threat too big to ignore. Even if the story is a bit hazy, the volatility pushed onto AMD and NVIDIA shares is evidence of where investors’ insecurities lay.
It should be highlighted that Tesla’s shift to AMD is far from confirmed. That said, the up-and-comer expresses an interest in branching into self-driving cars and AI application processors. Speculation points at a loss in NVIDIA’s competitive edge in AI markets, and investors do not take it lightly. Tesla is a recognized market leader in the field of artificial intelligence, too. A shift to Advanced Micro Devices could trigger an exodus of NVIDIA Corporation clientele.
Several reports insist that Tesla Inc. is making a switch to AMD in order to further its AI developments. The renewable energy company famously relies on NVIDIA as its biggest AI partner. The two firms secure high praise together and theirs products are on the very best of the Green500’s systems. With AMD on the rise and no clear safeguards in place, a future where Huang’s company no longer sits at the top seems possible.
The NVIDIA Corporation scare
The past 52 weeks have seen NVIDIA shares climb almost 200 percent. Investors love the company’s shares and would love it even more if they kept at their familiar pace. But they have hit a snag, brought on by Tesla Inc. and its speculated shift to AMD. The recent retreat in share value has investors spooked.
There is no formidable competitor rubbing shoulders with NVIDIA right now. The gaming GPUs, car GPUs and data center GPUs of the company are as robust as ever. This is mostly do to no significant competition. In the future, though, tougher rivals are bound have NVIDIA breaking a sweat to retain is market position.
A resurrected Advanced Micro Devices now takes on NVIDIA’s GeForce GPUs. The counter comes in the form of the new Vega GPUs. The initial batch of AMD graphics cards are set against the current generation Pascals. They are golden product under NVIDIA Corporation at the moment, and investors are concerned enough. Huang said there is no threat to Pascal. He is also sure that his company will stay “unbeatable” for a near future.
That is no excuse to ignore AMD. It is a once-sunken processor maker back with a vengeance. Ryzen came as an unexpected upset for Intel’s CPU dominance. NVIDIA GPU sales could find themselves slowing, too. A second-gen of the Vega chips is said to already be in development. They seek to counter the incoming Volta chips from NVIDIA set for 2018.
Investors should also pay careful attention the recent release of AMD data center CPUs and GPUs. As consumers warm up to a revived AMD, all high-end GPU makers are ought to keep an eye on their sales. The truth that there is a growing threat from AMD and other chipmakers looking to mine broadening tech markets.
Conclusion on AMD-Tesla-NVIDIA
Investors of NVIDIA Corporation are clearly on edge. AMD’s performance shows a corporation bound for robust sales and mass adoption. The investors of NASDAQ:NVDA are right for not ignoring the headwinds coming at the company. While the stock remains a great investment for the long-term, slows in sales and a depleted market share are not remote possibilities. The GPU maker is bound to face tougher competitors.