Oppenheimer Research is advising investors to concentrate on development in Nvidia Corporation's NVDA key data center business in 2023 despite the company's issues with restrictions on chip sales to China and declining PC demand.
What To Know: The Advanced Micro Devices, Inc. AMD rival chipmaker is set to report third-quarter earnings on Wednesday, Nov. 16. Wall Street expects the company to post earnings of 71 cents a share on revenue of $5.8 billion.
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Sales for the company's most significant business, its data center segment, are anticipated to decline by a percentage in the single digits from the prior quarter. A danger for the corporation has been a decrease in Chinese semiconductor demand.
What The Analyst Says: Oppenheimer analyst Rick Schafer is reducing his estimates on Nvidia ahead of its earnings report, dropping the price target from $250 to $225 and maintaining an Outperform rating.
The analyst sees enterprise spending weakness for Nvidia while waiting for the full effects of the recent U.S./China chip restrictions.
“Management expects a a $400M impact to [data center] in F3Q as U.S. restricts H100/A100 accelerator sales to China,” Schafer said in a note.
Despite enterprise project pushouts and U.S. export limitations balancing out substantial U.S. hyperscale spend, he predicts the data center segment will meet forecasts for the third quarter.
A positive factor Schafer notes is that he expects Nvidia’s auto segment to be up 2% quarter-over-quarter and 66% year-over-year as the still-nascent auto segment is led by increasing advanced driver-assistance system adoption.
“Nvidia has transformed from a graphics company to a premier leading AI computing platform company,” the analyst said.
Schafer noted that the risks to his $225 price target include:
- Slowdown in macroeconomic market or implications from geopolitical factors of tariffs/trade wars
- Loss of market share from competition with AMD in GPUs
- Technology manufacturing disruptions at key foundry Taiwan Semiconductor Mfg. Co. Ltd. TSM
- Concentrated DC spending by the top seven hyperscalers
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