NVDA Stock Prediction: Why Nvidia Lost Market Share In Discrete GPUs Last Q4 2017

NVDA Stock Prediction

 

The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First

Summary:

  • Jon Peddie Research has published its Q4 2017 add-in graphics cards report.
  • Nvidia’s market share declined to 66.3% from the 70.5% share it had in Q4 2016. It was also notably lower than Q3 2017’s 72.8%.
  • This is likely due to cryptocurrency miners pushing the average selling prices of Nvidia’s GPUs so high that many gamers switched to more affordable AMD Radeon GPUs.
  • Nvidia itself suggested last January that retailers should put gamers over cryptocurrency miners.
  • In spite losing GPU market share to AMD, NVDA is still a Buy.

Nvidia’s (NVDA) January 2018 plea for retailers to put gamers over cryptocurrency miners partly explains why it lost market share in Q4 2017. Jon Peddie Research has published its latest add-in board report. Nvidia lost a notable part of its global market share to Advanced Micro Devices (AMD) in Q4 2017 discrete GPUs. Cryptocurrency miners snapping up 3 million discrete AMD/NVDA GPUs last quarter is why Nvidia GeForce GPU prices went to the roof.

Nvidia’s share dipped Year-to-Year and Quarter-to-Quarter.

nvda stock prediction_pic1

A check on Amazon (AMZN) revealed that GTX 1070 Ti sells for $800+++, far above its original suggested price of $449. Due to the scarcity and high price tags of Nvidia GPUs, Ethereum miners (and desperate gamers) shifted to buying AMD Radeon GPUs. This explained why AMD’s share went from 27.2% in Q3 to 33.7% in Q4. Jon Peddie Research claimed that AMD was the primary benefaciary of those 3 million GPU sales to cryptocurrency miners.

Nvidia also lost quarter-to-quarter market share in overall graphics chips shipped. Including integrated/embedded GPUs, Nvidia’s graphics chips shipment was down -6% while AMD’s share grew +8%. Cryptocurrency miners of Ethereum is also likely why discrete desktop graphics products posted a +9.7% annual growth in 2017.

nvda stock prediction_pic2

(Source: Jon Peddie Research)

Why Nvidia Is Still A Buy

In spite losing market share, Nvidia still posted a record Q4 revenue of $2.91 billion (up 34% Year-over-Year). This is the compelling reason why I still rate NVDA as a buy. The stock trades well above the $190 price target I made last year. However, Nvidia is benefiting from higher average selling prices (largely due to Ethereum miners) of its GPUs. Let us not forget that Nvidia now competes with third-party GPU vendors. Nvidia sells its own in-house Founders Edition versions of its Pascal GTX 1080/1070-series video cards.

As per Jon Peddie’s report, mid-range and high-end graphics cards accounted for a much larger part in 2017 discrete GPU sales last year. Mid-range GPUs ($250++) accounted for 51% (up from Q4 2016’s 41.5%). High-end GPUs also improved from 11.5% to 16.0% share in Q4. Based on the impressive Q4 performance of Nvidia’s earnings, its mid-range GTX 1060/1070 and high-end GTX 1080 profited from this global shift to more expensive graphics cards.

nvda stock prediction_pic3

(Source: Jon Peddie Research)

Conclusion

The current $880 price tag of 1 Ether will continuously compel miners to snap up any discreet Nvidia Pascal GPU card available in the market. One year ago, Ether’s price was only $14.70. The huge persistent demand for GPUs by Ethereum is a large factor why Nvidia’s stock is trading above $245.  Ether is more resilient than Bitcoin. The more stable Ethereum cryptocurrency means Nvidia GPUs will continue to sell much higher than their original retail prices.

nvda stock prediction_pic4

(Source: Coinmarketcap)

GPU cryptocurrency mining is set for a long-term bonanza. Aside from Ether, there are dozens of other GPU-friendly cryptocurrencies. Perceptive miners will probably promote Ethereum Classic after Ethereum mining’s profit declines.

The revenue from Pascal desktop GPUs is good enough that Nvidia doesn’t even need to release a consumer/desktop-level Volta GPU. Based on the strong growth trend in gaming (now also cryptocurrency mining) GPUs, Nvidia can afford to further delay consumer Volta GPUs to 2H 2018.

nvda stock prediction_pic5

(Source: Nvidia)

My buy rating for NVDA is in line with its very optimistic near and long-term algorithmic market trend forecasts. I Know First has a very bullish one-year NVDA stock prediction. It gave the stock a +623.74 market trend score. I Know First is very confident that NVDA will trade much higher in price within the next twelve months.

nvda stock prediction_pic6

Likewise, analysis of moving averages and technical indicators also comes up with a strong buy recommendation for NVDA.

nvda stock prediction_pic7 (Source: Investing.com)

Past I Know First Forecast Success with NVDA

On November 21st, 2016 I Know First published a premium article explaining why NVDA stocks would continue to soar. We analysed the main fundamental drivers behind the potential growth, including company’s financials as well as its overall business strategy and outlook for 2017. The results of the analysis were in line with the bullish NVDA stock prediction produced by I Know First’s algorithm for 1 and 3 months, as well as for 1 year time horizons:

nvda stock prediction_pic9

As it could be seen from the graph below, the actual performance of NVDA stock over the period from November 21st, 2016 to November 21st, 2017 was bullish and demonstrated significant growth 132.36% on 1 year time horizon, extremely outperforming the industry’s index (NASDAQ):

(Source: Yahoo Finance)

Current I Know First subscribers received this bullish forecast for NVDA on November 21st, 2016.

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I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.