NVIDIA Corporation (NASDAQ:NVDA) has fallen 6% today after Michael McConnell of Pacific Crest lowered his rating to ‘Underweight’ from ‘Sector Weight’. McConnell is bearish on the stock due to what he believes are ‘signs of desktop GPU market saturation, lower margins from incremental Nintendo Switch revenue and a possible pause in its Datacenter business this summer’.
Earlier in the week, some traders were watching NVIDIA for signs of weakness due to Apple Inc. (NASDAQ:AAPL) announcing that it will drop the use of Imagination Technologies’ IP in 15-24 months. Instead of using Imagination’s services, Apple has implied that it might use its own in-house graphics technology. The news is relevant to NVIDIA because some traders fear Apple could eventually do the same for GPUs in MAC laptops. As it currently stands, AMD and Nvidia laptop GPUs are still top-tier and many investors aren’t too concerned about that possibility.
With that said, shares of NVIDIA could also be soft due to profit taking. The stock has surged sharply over the last few quarters and some investors could be taking some money off the table.
What Does The Smart Money Sentiment Say?
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).
According to our data, hedge fund sentiment around NVIDIA has been mixed. Of the 742 elite funds we track, 35 funds owned $2.5 billion of NVIDIA Corporation (NASDAQ:NVDA) and accounted for 4.30% of the float on December 31, versus 51 funds and $1.9 billion respectively on September 30.
The Bottom Line
NVIDIA Corporation (NASDAQ:NVDA) shares are lower today due to an analyst downgrade. For another interesting read, check out the ‘6 Least Technologically Advanced States in America‘.