Wall Street’s biggest Nvidia bull and bear debate how crypto, data-center competition, and the China slowdown will impact the chip giant (NVDA)

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Nvidia‘s stock shed nearly half of its value from November to January after the chipmaker delivered disappointing third-quarter results and later cut its fourth-quarter revenue guidance.
But shares recovered a bit as its fourth-quarter results topped Wall Street estimates and after it beat out Intel in the race for acquiring Mellanox Technologies.
To distill the latest arguments for and against investing in Nvidia, Markets Insider asked the Wall Street analysts carrying the stock’s highest and lowest price targets the same questions.
Watch Nvidia trade live.

Nvidia has sparked extreme views among Wall Street analysts.

The bulls say Nvidia is a dominant player in many segments including data center, professional visualization (pro-vis) and automotive.

However, bears say Nvidia’s valuation has gotten out of control and that it faces pretty decent competition in the data-center market.

Nvidia shares shed 57% of their value from October to January after the chipmaker delivered disappointing third-quarter results and later cut its fourth-quarter revenue guidance. The company cited excess of mining graphics processing units (GPUs) following the crypto-currency boom, and declining macroeconomic conditions, particularly in China, for its underperformance.

But shares recovered a bit as Nvidia’s fourth-quarter results topped Wall Street’s expectations and after the company beat out Intel in the race for acquiring Mellanox Technologies, a supplier of computer-networking products. That deal is widely seen as a strategic bid that can help the chipmaker grab an even bigger piece of the growing data-center market. Shares settled at $165.56 apiece on Thursday — 43% below their record high set in October.

To be sure, Wall Street analysts are still pretty bullish on the name. Among those surveyed by Bloomberg, 29 have a "buy" rating, nine recommend "hold," and three say "sell."

The SunTrust analyst William Stein is the biggest Nvidia bull on Wall Street, according to Bloomberg data. He carries a $210 price target. (Ho Kang-Wei, an analyst from the Singapore-based Phillip Securities, has a price target of $274 on Nvidia, but he hasn’t updated any of his recommendations since May.)

Meanwhile, Abhinav Davuluri, an analyst at Morningstar, is the biggest bear on the chipmaker, with a $120 price target. (The Exane BNP Paribas analyst David Connor also has a $120 target, but he didn’t respond to a request for comment.)

These interviews have been edited for clarity and length.

Use one sentence to describe your investment thesis.

Rick Wilking/Reuters

Stein (Bull): "Despite near-term demand disruptions in the Datacenter and Gaming end markets, we expect Nvidia’s stock to continue outperforming owing to long-term potential for revenue & EPS upside across most segments (especially in Datacenter, Pro Vis, and Automotive) and a sustained higher P/E owing to the scarcity premium for structural growth in large-cap semis."

Davuluri (Bear): "The company is a fantastically positioned one for a lot of trends in automotive and Artificial Intelligence; however, I think the valuation is just way ahead of where it’s feasible."

How concerned/confident are you about Nvidia’s excess of mining GPUs after the boom and bust in digital currencies?

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Stein (Bull): "Nvidia’s recent weaker performance – not only in the gaming end market, but in the data center end market as well – can only make us and investors more concerned (less confident) about the company’s ability to execute."

"Still, we find reasons for hope. First, as it relates to the crypto effect, Nvidia has taken action to reduce channel inventory, and given low Ethereum prices today, it seems that a recurrence of the crypto problem is unlikely."

Davuluri (Bear): "This is something we have been concerned about since the boom in early 2018 and even the end of 2017. Our fair value of $120 a share for Nvidia has been the same since April of 2018. So almost a full year, we’ve been at this valuation."

"The crypto slowdown has prompt people to buy mining GPUs from the secondary market, which has created a low demand for Nvidia’s GPUs. That’s why we see this massive inventory correction in a couple of quarters."

How will weaker economic conditions in China impact Nvidia’s GPU business?

AP Photo / Paul Sakuma

Stein (Bull): "Similar to many semi companies that sell into the China consumer market, weak economic conditions in the region are negatively impacting gaming demand."

"We believe the primary source of this weakness (excluding the crypto mining overhang) was the trade conflict between the US and China. As those issues resolve themselves, we expect this market will continue to grow."

Davuluri (Bear): "China consisted of a very massive portion of Nvidia’s GPU demand decline, as naturally a lot of gamers and mining operations are in China. That’s pretty consistent with what Nvidia’s exposure to China has been."

"Moreover, the US-and-China trade tensions, and a broader economic slowdown in China may have played some roles."

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