Barron’s just made a case for Nvidia stock price doubling. We are a fan of Barron’s and its mostly thoughtful content. However, Barron’s has been known to be wrong at times and if past is the prologue, one more time Barron’s is providing an opportunity to short sell NVDA at much higher price than otherwise possible.
Barron’s is correct in emphasizing the importance of Graphics Processing Units and NVDA’s expertise in this area. However, Barron’s Misses the mark in the following areas:
- NVDA has already licensed all of its relevant intellectual propert regarding GPUs tpo Intel. Intel has been slow, but when INTC catches up it will not be lacking GPU intellectual property.
- AMD has also missed the boat on the mobile processors, but through acquisition of ATI the GPU technology at AMD is at par with NVDA.
- AMD will either catch up in the mobile market or license its graphics intellectual property to the likes of TXN, MIPS and Qcom.
- With debut of INTC’s Sandy Bridge processor, NVDA will lose as much as 50% of its traditional high margin business.
- Barron’s does not show a good understanding of the lower gross margins in the mobile business.
- Barron’s drastically underestimates the competition that is coming to the mobile market.
- NVDA does not own its own CPU intellectual property, but licences it from ARMH. Licences from ARMH are available to NVDA’s competitors.
- NVDA is used to a duopoly with AMD in GPUs, now NVDA is entering into a highly competitive area.
The environment now reminds us of 70’s and early 80’s when there were numerous vendors in the general purpose microprocessor business. Ultimately only one architecture x86 prevailed. The point is look back at the history is instructive before becoming overly bullish on NVDA
