This article was written by the I Know First Research Team.

Summary:

• NVDA suffered a dramatic slump in late 2018 on the back of a “crypto hangover” and underperforming data center segment.
• In 2019, stock went on a rebound, but short-term prospects are mired by pessimism on sales and fears of US-China trade war.
• Despite possible volatility in near future, long-term outlook is bullish, with new and more affordable releases, Mellanox acquisition. 

Short Term: A Troubled Recovery

NVIDIA Corporation stocks (NASDAQ: NVDA) have been enjoying a bit of a rollercoaster ride lately, peaking at an impressive $292 in early October 2018 to slump all the way to $127 by late December in a stunning reversal that wiped off months of gains. This nosedive came on the back of multiple factors, including what the company called its “crypto hangover”. With graphics processing units (GPUs) being used in stacks to mine cryptocurrencies, NVIDIA, world’s leading GPU manufacturer, was one of the key beneficiaries of the global crypto-trade. Thus, after the crypto market crashed in 2018, decreasing the appetite for GPUs, especially those tailored to the needs of the miners, NVIDIA’s sales took a beating.

Other factors driving NVDA’s slump included a somewhat cold reception of its latest gaming GPU line-up, based on an architecture called Turing. High prices on new models discouraged gamers from upgrading their battlestations, and lower demand for gaming GPUs in China also took its toll. The data center segment was performing below expectations as well, albeit still showing a year-on-year increase. 

Going on a rebound in 2019 despite such major drawbacks as poor sales figures reported in February, which even prompted the company to prepare the investors for the slump by releasing a guidance for lower sales in advance, the stock climbed back to $192.15 by mid-April. NVIDIA’s announcement of a $6.9 bln. acquisition (largest in its history) of Mellanox (NASDAQ: MLNX), Israeli manufacturer of interconnect solutions, was one of the factors that have seemingly helped push the stock back up.

From there, however, it went on another downward plunge, battered by Tesla’s (NASDAQ: TSLA) announcement of its own proprietary chip that would power its self-driving vehicles. Its short-term prospects remain shaky as the company is set to release its next quarterly report on Thursday, May 16^th. While there have been no heads-up warnings this time around, suggesting that there is no need to anticipate any drastic slumps, no breakthroughs are expected in the company’s lifeline gaming segment either. Furthermore, another key point to look at are the sales in the data center segment, the one that NVIDIA has been increasingly betting on as it sought to establish itself as one of the leaders in the AI industry; on that front, a recent Intel (NASDAQ: INTC) report indicated a less-than-anticipated demand in this sphere.

Long Term: Rising Back Up Strong

While in the short term, the stock could be in for a period of turbulence, there is still reasonable ground to expect it to go bullish within, roughly, a 12-month period. With the gaming and data center segments still accounting for over half of NVIDIA’s revenues, there are positive developments in both sectors – and a possible tailwing coming from a new direction.

Starting with NVIDIA’s biggest money generator, it is worth noting NVIDIA’s 2019 line-up of gaming GPUs, with RTX 2060, GTX 1660 and GTX 1660 Ti bringing the top-notch Turing architecture into the mid-range price segment – a development that could bolster NVIDIA’s sales in the strategic sector. Equally noteworthy is the announced that the laptop version of GTX 1660 Ti as well as GTX 1650 would power a major line-up of budget gaming laptops form multiple manufacturers. All this could help NVIDIA beef up its performance in the sector that has proved to be crucial for the price of its stock during the recent slump.

On the data center front, the deal with Mellanox could greatly bolster NVIDIA’s positions in the data center segment, as outlined in our prior publication. Both companies are among the clear leaders in the field of high-performance computing, with their products, taken together, powering half of the world’s top 500 supercomputers. The key factor to look out for in this respect, however, are the renewed fears of a full-scale trade war between the US and China following talks that have produced no results, with both sides introducing tariffs against each other. While there have been some positive statements regarding the process, the semiconductor sector is set to suffer should the worst come to worst as China is an important market for the data center tech as well as the gaming apparel.

Finally, another new release, the Jetson Nano, is also worth noting. This small, but relatively powerful AI computer could be used to power video processing systems utilizing neural networks to classify objects in images or various robots – without having to rely on cloud tech. Designed to appeal to a mass audience, the device is more than just an attempt to bring AI-driven robotics to the general public. It is also an indication that robotics could become another major sector for NVIDIA – and the forecast for this market is promising big gains for those who can establish themselves as the leaders. For more on this, take a look at this post.

These estimates are backed by I Know First’s proprietary AI, which still gives NVIDIA a strong bullish outlook, expecting it to climb high up within a 12-month time horizon. It puts the signal for the 1-year time horizon at 195.92, expecting a very strong performance against the other stocks on the forecast, and a predictability of 0.79.

Past I Know First Forecast Success With NVDA

On December 27, 2018, I Know First’s AI-driven algorithm gave a bullish forecast for NVDA, with the 3-month time horizon signal at 5.92 and predictability at 0.65. In 3 months, the stock gained 34.56%, demonstrating a strong growth.

This NVDA stock forecast was sent to the current I Know First subscribers on December 27, 2018.

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Please note-for trading decisions use the most recent forecast.