Bluefin Research Talks Trade War Impact On Nvidia, AMD

Bluefin Research recently returned from a trip to Asia to survey demand in the semiconductor industry.

Analyst Paul Peterson expects suppliers to beat Wall Street estimates in the coming earnings season and announce roughly in-line guidance.

“We think the uncertainty surrounding the impact on the various tariffs imposed will provide cover for suppliers to give more muted guidance despite any concrete evidence that the tariffs are having any detrimental impact,” Peterson said in a Friday note.

Supply Chains Steady On Trade War Uncertainty

Chip suppliers for automotive companies — who are a prime target for tariffs on all sides — “categorically denied” making any recent adjustments in their supply chains, saying they would be premature, Peterson said. Original equipment manufacturers don't want to risk losing product allocations on tight components before the tariff dust has settled, he said. 

It will likely take months for the full impact of tariffs to be understood, and there's always the chance tariffs are revoked.

Some suppliers speculated that OEMs may have hoarded chips ahead of the trade war, the analyst said. Huawei — the Chinese telecom company and smartphone maker — was a name that frequently came up, but Bluefin said it was unable to find any evidence to support the theory.

Focus On Data Centers For AMD, Nvidia

Weakness in cryptocurrency mining products has hurt Advanced Micro Devices, Inc. AMD and NVIDIA Corporation NVDA, and demand for graphics cards has also been muted, according to Bluefin. 

Channel checks suggest retail GPU sales fell by over 50 percent in North America and Europe, Peterson said. 

Nvidia has been pressuring retailers to cut their prices in order to move inventory, suggesting it wants to wait until inventories are at acceptable levels to launch its Turing product, the analyst said. 

“We think the elevated inventory levels in the channel could weigh on Nvidia’s outlook modestly, although the company will benefit from a Turing stocking event in the October quarter." 

AMD’s weakness in graphics could have a more lasting effect moving into Q3, as the company doesn't have a product launch coming, Peterson said. 

Shifting Focus To Data Centers

The analyst expects investors to focus on growth in data centers, which have become a primary demand driver for Nvidia and AMD.

AMD’s Epyc servers have seen strong momentum, and management is growing more confident in hitting their 5-percent unit share target leaving 2018, Peterson said. Field checks also show customers have been very positive on the company’s roadmap, especially considering disappointment surrounding Intel Corporation INTC.

“Bottom line: While crypto demand remains weak and overall graphics card sales are sluggish, we believe data center momentum will be the primary driver for AMD and Nvidia stocks in the near term,” Peterson said. 

Price Action

AMD shares were set to close down 1.87 percent Friday, while Nvidia was down nearly 1 percent. 

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