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- SoftBank is reportedly exploring a sale of its Nvidia stake for early next year.
- “This is a negative” as Softbank likely has solid information on overall Data Center trends, RBC analyst Mitch Steves, a long-time bull on Nvidia, said in a note out Wednesday.
- He concludes that the near-term setup is “under pressure.”
- Watch Nvidia trade live.
Nvidia‘s near-term trading dynamics are under pressure as SoftBank’s Vision Fund is reportedly exploring a sale of its stake in the chipmaker for early next year, RBC says.
The Vision Fund plans to dump its holdings in Nvidia as shares keep sinking, Bloomberg reported on Tuesday, citing sources familiar with the matter. SoftBank quietly acquired a $4 billion stake in Nvidia in early 2017, making it the fourth-largest shareholder. The holding was then later transferred to the investor’s Vision Fund.
“This is a negative, as Softbank likely has solid information on overall Data Center trends and the chances that Data Center spending is only up +1-3% next year are increasing,” RBC analyst Mitch Steves, a long-time bull on Nvidia, said in a note out on Wednesday.
Nvidia’s data-center sales, the main driver of the company’s bottom line, grew a record 70% on a yearly basis in the first nine months of 2018. But Steves said the new information led him to lower his forecast on Nvidia’s data-center revenue growth to between 25% and 30% year-over-year, down from a 40% to 60% y/y increase.
“Combining this with used GPUs being resold in the secondary market, we think the near-term setup is under pressure,” Steves added.
Nvidia’s stock has faced a huge selling since the stock-market sell-off that began in early October, losing nearly half of its value from its all-time high of $292.75 reached on October 1. The chipmaker reported brutal third-quarter earnings that missed analysts’ expectations last month, largely due to slowing sales of mining GPUs for cryptocurrencies. Management in August warned that it was expecting “essentially no cryptocurrency” business moving forward.
The chipmaker’s crypto problems “will persist longer than expected,” Steves said in November, adding that market demand for used GPUs and higher-quality chips from private companies both added to risks for the excess of mining GPUs for cryptocurrencies.
Steves on Wednesday lowered his price target from $260 to $230 – 55% above where shares were trading on Tuesday – and kept his “outperform” rating, saying Nvidia’s long-term secular story is unchanged.
Nvidia is now down 28% this year to $145.80 apiece.
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