Nvidia still seen as having near-term issues as Q3 comes up

Justin Sullivan

Nvidia (NASDAQ:NVDA) has a "superior position" in artificial intelligence and is well positioned for other longer-term opportunities, but the company's near-term issues could continue to weigh on the company's third-quarter results, investment firm Wedbush Securities said.

Analyst Matt Bryson, who has a neutral rating and a $160 price target on Nvidia (NVDA), noted near-term issues, such as data center sales, lead to investor uncertainty.

"Uncertainty pertains mostly to NVDA's data center business as we lack visibility into how new US restrictions on shipments of AI chips to China might have affected sales or how softer data center spend might impact AI requirements," Bryson wrote in a note to clients.

Bryson added that while Nvidia (NVDA) management said there would be roughly $400M in revenue at risk, it's unclear if product was "pulled through indirect channels" and thus boosting the third-quarter, or if there was a bump because of the new limitations set forth by the Commerce Department.

The analyst also noted that despite Advanced Micro Devices' (AMD) recent improved offerings, Nvidia (NVDA) is still the "clear leader" in gaming and it is seen as "well positioned" in the autonomous driving market.

And lastly, while Nvidia (NVDA) has a "superior position" in artificial intelligence, with Meta Platforms (META) continuing to grow its AI-linked hardware, there could be a concern that slowing data center spend could weigh on the company's financial results, perhaps extending into 2023.

Last week, Bank of America said Nvidia (NVDA) would be one of the beneficiaries of the 5 C's for semiconductors.