What happened
Shares of semiconductor giant Nvidia (NVDA +4.32%) slid in morning trading Wednesday, down 2.5% as of 10:10 a.m. ET.
You can blame Deutsche Bank for that.
Image source: Getty Images.
So what
German megabank Deutsche Bank cut its price target on Nvidia stock by 10.5%, to $255 per share this morning, reports TheFly.com. Nvidia's next earnings release may still be as much as a month away (last year, Nvidia reported first-quarter results on May 26). But as earnings day approaches, the banker believes that semiconductor stocks are entering the "purgatory" stage of their business cycle -- in which no matter how good the profits look, investors will shy away from buying over fears of a coming slowdown.
Now what
And yet, even if Deutsche's right, this seems to me more a problem with Nvidia investor confidence than with Nvidia's business itself.
In a separate note today, covered by StreetInsider.com, analysts at Daiwa Securities Group note that the PHLX Semiconductor Sector index hit an 11-month low this week, and yet, "positive fundamentals have not changed" for the semiconductor industry. Industry demand for semiconductors to power autonomous and electric vehicles, run artificial intelligence programs, and simply power PCs and gaming consoles remains robust. In general, semiconductor companies are expected to keep on posting double-digit growth this year. (Indeed, analysts have Nvidia pegged for 43% growth this quarter, and 34% next quarter.) And semiconductor supply isn't expected to catch up to semiconductor demand before sometime in 2023 at the earliest.
Given all of the above, Nvidia stock at 38 times forward earnings -- while not exactly cheap -- doesn't look absurdly expensive, either.
