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Stock Analyst Update

Nvidia Ends Hot Streak

For the first time in years, the narrow-moat firm's revenue range fell below consensus estimates.

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 Nvidia (NVDA) reported second-quarter results that modestly exceeded our expectations, thanks to broad-based growth across its four major segments of gaming, data center, professional visualization, and automotive. However, the firm's hot streak of 11 consecutive quarters of beating expectations and guiding higher than estimates was finally snapped, as its third-quarter revenue range fell below consensus estimates. We note the firm recently announced its latest GPU architecture: Turing, along with a brand-new Turing-based RTX GPU for high-end visualization. Furthermore, Nvidia is expected to announce a new set of gaming GPUs next week. While we surmise the new product launches could be partially responsible for the softer guidance (as they will not be available the entire quarter), management did not include any cryptocurrency-related sales in its forward guidance. Shares fell about 5% during after-hours trading as the market has come to expect beat and raises from narrow-moat Nvidia.

We are maintaining our $120 fair value estimate and view shares as grossly overvalued, given our view that the firm's gaudy market opportunities in artificial intelligence and autonomous driving will not be conquered solely by Nvidia, contrary to what current stock levels imply.

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Abhinav Davuluri does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.