Seesawing semiconductor stock Nvidia (NVDA 1.47%) moved lower ahead of its expected Wednesday-evening earnings report, falling 2.1% through 10:55 a.m. ET on Monday (although it's back in the green now at midday).
Two separate analysts lowered their price targets for Nvidia ahead of the report, with UBS cutting the shares to $280 and Bernstein predicting a $225 target price.
Both analysts pointed to worries about falling demand for GPUs in the gaming segment as the reason for their cuts, reports TheFly.com, although UBS said demand probably won't "fall off ... quite yet" -- referring to Nvidia's Q1 results. That doesn't necessarily mean, however, that after reporting good numbers for Q1, Nvidia won't proceed to warn on Wednesday about future bad numbers in Q2 and beyond.
Indeed, Nvidia itself appears to be taking steps to prepare for leaner times ahead, with Barron's and The New Indian Express reporting over the weekend that Nvidia is slowing down its hiring.
Meanwhile, in Switzerland, Intel CEO Pat Gelsinger went on Yahoo! Finance Live today to predict that Intel might build as many as 10 new factories (or more) over the next five years, including in Ohio and Germany. In the nearer term, Gelsinger said we are "about halfway through" the global semiconductor shortage. This implies the shortage will "persist through 2024."
What does this mean for investors in the semiconductors industry? Nvidia's rival appears to be seeing a light at the end of the chip deficit tunnel. At the very least, this implies that strong chipmaker pricing power won't last forever and high profit margins will eventually go away, potentially putting the industry back in its historical boom-bust cycle. This alone could be one reason investors have decided to become more cautious on Nvidia ahead of earnings.
That said, Gelsinger also noted that equipment lead times have been pushed out "substantially," delaying the start-up of all these new chipmaking factories. And the longer it takes the makers of the equipment that makes the chips to deliver, the longer the chip shortage itself will persist.
It's hard to make predictions, especially about the future, but with Nvidia shares down 44% since the start of this year, a lot of the risk has been squeezed out of this stock already. Barring a warning about an imminent drop in demand this week, I suspect Nvidia stock will survive earnings day just fine.