2024-04-23 06:14:11
AI shares suddenly fell. Last week, two semiconductor manufacturing heavyweights, TSMC and ASML, weighed on the sector following falling profits triggered a sell-off. In the first five trading days, Arm fell 23%, Supermicro fell 21%, and Nvidia fell 8%.
Does this mean the AI bubble is regarding to burst, or is it just a temporary phenomenon? nobody knows. However, according to financial investment consultancy The Motley Fool, Huida and Supermicro are expected to continue to decline.
Huida might fall another 20%
Nvidia has been the undisputed leader of the AI boom. Growing demand for AI has pushed Nvidia’s revenues to triple in recent quarters and profits to grow faster; However, DA Davidson analyst Gil Luria analyzed the stock following Nvidia released its February earnings report and gave a neutral rating with a target price of $620. it might fall 22% from Monday’s closing price of $795.18.
Luria acknowledged that Nvidia’s performance is strong and it has the ability to continue to dominate the AI computing field, but competitors are expected to catch up and market demand for Nvidia might decline over the next four to six quarters.
Indeed, AMD and Intel have launched AI GPUs different from Nvidia. However, it is too early to say whether Nvidia will lose much market share. The consensus on Wall Street is that the strong growth trend can continue. If revenue falls as Luria suggests, at least in some categories, the stock price will almost certainly fall.
Super Micro might collapse to 65%
The products of this high-end server manufacturer are particularly suitable for running AI applications. Its stock price has soared since the start of 2023, and its revenue has also skyrocketed, increasing by more than 100% in the most recent quarter.
But not all analysts are optimistic regarding AMD’s potential. After Supermicro released its financial report in late January, Susquehanna gave the stock a sell rating and a price target of just $250, 65% below Monday’s closing price of $717.02.
Susquehanna acknowledged that AI computing had long-term growth potential, but saw some problems with Supermicro’s performance. For example, revenue grew rapidly, but gross profit margin declined. Susquehanna believed the business model was insufficient. Supermicro’s working capital and earnings quality have also been called into question.
If Supermicro’s third-quarter earnings report is disappointing, Friday’s selloff might be a sign of bigger problems. If the company doesn’t follow through on the guidance it set in late January, investors with high expectations will be disappointed. Regardless of the data, Supermicro’s stock price is expected to see huge moves.
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