KeyBanc Capital Markets warns that Nvidia and Advanced Micro Devices may get affected by softening demand in China. But the firm's analyst John Vinh says the two chip stocks are still attractive buying opportunities.
On Wednesday, Vinh reduced his price target for Nvidia shares (ticker: NVDA) to $220 from $230 and lowered his forecast for AMD shares ( AMD) to $80 from $85. He reaffirmed his Overweight ratings for both.
"Feedback from the Asia supply chain indicates that overall demand trends continue to weaken" in the fourth quarter, he wrote. China "Covid cases are spiking, which is having a negative impact on end consumption for goods."
Nvidia stock rose 0.6% to $160.01, while AMD climbed 1.5% to $69.06 on Wednesday.
The analyst expects Nvidia's chip business in both the gaming and data center markets may slow due to China. AMD will also get hit by the falling demand in computers, he said.
On Tuesday, research firm IDC announced global computer sales have dropped 28% in the fourth quarter versus the prior year, citing a continued unwind of the pandemic-era boom.
Despite the weak trends, Vinh is optimistic.
"We believe semiconductor companies are in a much better position to navigate this downturn versus past cycles," he wrote. "The risks associated with the current correction have already been reflected in the stocks."
Nvidia and AMD stocks have fallen by 44% and 51%, respectively, over the last 12 months.
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