Nvidia a Clear Winner in Otherwise Brutal Quarter for Chipmakers

(Bloomberg) -- Semiconductor companies are on track for their worst quarterly performance in years, but one name has stood in stark contrast to the industry-wide carnage, emerging as one of the biggest gainers in the overall market: Nvidia Corp.

The company has shrugged off pandemic-related headwinds that have created “chaos” for its chipmaker peers. While it hasn’t been immune to these issues -- last month, it cut its first-quarter revenue forecast by $100 million due to the coronavirus -- analysts have instead focused on its balance sheet, cash flow, and product categories that are expected to remain strong in the current environment.

Earlier this month, Morgan Stanley wrote that Nvidia was the large-cap growth stock “with the best chance of powering through tough conditions” and singled out its data-center business as a driver. Last week, Needham upgraded the stock to buy, forecasting higher demand for chips used in medical applications, as well as in artificial intelligence applications.

Nvidia is up about 14% thus far this year, putting it in the top 10 gainers on the S&P 500. Meanwhile, the Philadelphia Semiconductor Index is down more than 16%, putting it on track for its biggest quarterly loss since 2011. Nvidia’s outperformance continued on Tuesday, the last trading day of the quarter, when it rose as much as 3.7% compared with the benchmark’s 1.5% gain.

Read more: Chipmakers Facing Risks Akin to 2008 Crisis, Analysts Warn

On Tuesday, Susquehanna Financial Group raised its Nvidia price target by $10 to $330, writing that “enterprise demand remains strong and supply constraints have (basically) been alleviated,” while the remote-work trend is “helping overall demand” for cloud-computing chips.

The firm reiterated its positive view on the stock, but cautioned that Nvidia was in “a holding pattern” with respect to the timing of 7nm product launches due to the outbreak.

For Nvidia’s first-quarter results, which are expected in mid-May, Wall Street is looking for adjusted earnings of $1.65 a share and revenue of nearly $3 billion. The profit forecast has risen by 8.5% over the past three months while the revenue forecast is up 5.2%, according to data compiled by Bloomberg.

In its most recent report, released in February, Nvidia reported fourth-quarter results that beat expectations, with data-center chips seen as a particular bright spot.

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