Nvidia Downgraded To Sell On Growth, Competition Worries
September 08, 2008: 12:56 PM EST
SAN FRANCISCO (Dow Jones) -- Shares of Nvidia Corp. fell Monday after UBS downgraded the chipmaker's stock to sell on concerns about its long-term growth and mounting competition from Advanced Micro Devices and Intel Corp.
Nvidia (NVDA) was down 3.7% at $11.24 in afternoon trading of more than 17 million shares. UBS also lowered its price target to $11.
Nvidia had been one of the hot stocks of the tech sector last year, but it has seen its shares fall more than 60% since the beginning of the year.
Last month, the company reported a huge second-quarter net loss, weighed down by a $196 million charge related to production glitch involving a weak die/ packaging material set in specific notebook systems.
UBS said Santa Clara, Calif.-based Nvidia's "longer-term growth story will be more challenged," citing more aggressive initiatives by Intel (INTC) and AMD ( AMD) to push into the graphics-chip market where Nvidia is dominant.
"AMD's discrete graphics chips are likely to remain competitive with historical gross margins 10 points below Nvidia," UBS wrote in a research note. "Intel's future [graphics processor unit], Larrabee, is a credible effort that could impact Nvidia's high-end desktop GPUs and professional business."
The UBS note added, "Even as we may be overly bearish as to Nvdia's long-term competitiveness and growth opportunity given its deep technical strength and industry leadership, we believe the stock offers very limited upside near-term."
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