Northland predicts NVDA stock selloff post-Wednesday report

On Monday, Northland Securities projected a potential selloff of NVIDIA Corporation (NASDAQ:NVDA) shares following the company’s upcoming financial report set for release on Wednesday. The anticipated market reaction is attributed to a combination of capacity constraints in the first half of the year and a shift in purchasing patterns among NVIDIA’s major customers, who are now opting to buy only graphics processing units (GPUs) instead of a broader range of products. According to InvestingPro analysis, NVIDIA appears to be trading above its Fair Value, suggesting the market may be pricing in optimistic growth expectations.Want deeper insights? InvestingPro’s comprehensive analysis includes 12+ key metrics and proprietary Fair Value models that help investors make informed decisions about NVIDIA and other tech giants.

Northland analysts indicated that despite the expected selloff, there are opportunities for companies involved in Application-Specific Integrated Circuit (ASIC) sales, such as Teradyne (NASDAQ:TER), Alpha and Omega Semiconductor (NASDAQ:AOSL), and Altaba Inc., which could benefit from the current market dynamics. They also noted that firms like CEVA , Inc. (NASDAQ:CEVA) and Camtek Ltd . (NASDAQ:CAMT), which offer AI at the edge and solutions to alleviate capacity constraints, respectively, may also gain from the situation.

The report highlighted issues NVIDIA faces, including a shortage of Chip on Wafer on Substrate (CoWoS) capacity at the Taiwan Semiconductor Manufacturing Company (TSMC), which restricts the availability of server and data center GPUs. This bottleneck is partly due to alterations in the packaging process by Blackwell, a fictitious entity mentioned as an example. The analysts anticipate that these capacity constraints will ease in the second half of 2025.

Furthermore, Northland’s commentary suggests that NVIDIA is adjusting its product strategy by accelerating the introduction of the GB300 and discontinuing orders for chips used in the GB200, due to the ongoing transition issues with the Blackwell product. The firm also observed a trend where hyperscale companies are increasingly using NVIDIA’s GPUs exclusively for custom AI server implementations, bypassing NVIDIA’s Grace CPUs and Mellanox (NASDAQ:MLNX) networking products.

The analysis points to a growing preference for Advanced Micro Devices, Inc.’s (NASDAQ:AMD) CPUs in next-generation AI servers, despite similar capacity limitations. InvestingPro data shows AMD’s impressive revenue growth of 242% in the last twelve months, with analysts projecting 69% growth for the upcoming fiscal year. Northland remains optimistic about AMD’s AI revenue prospects, forecasting a substantial increase to $9.2 billion, doubling from the previous year’s $4.5 billion. This growth contrasts with a projected 4% to 5% market share loss for NVIDIA in the GPU/AI accelerator market.

AI-related data center semiconductor revenue is expected to grow by 45% in the calendar year 2025, with Northland’s estimates placing NVIDIA’s data center revenue growth at a lower rate than the consensus forecast. The analysts anticipate that NVIDIA will lag behind the overall AI-related data center growth by approximately 4.5%. For comprehensive insights into the semiconductor industry’s competitive landscape, InvestingPro offers detailed analysis of 1,400+ stocks, including proprietary Fair Value models and health scores that help investors identify potential market leaders and laggards. Despite the industry’s expectations for a second-half upturn in AI spending, Northland believes NVIDIA will underperform during the recovery due to these market share shifts.

In other recent news, Astera Labs has reported impressive financial results for the fourth quarter of 2024, with revenue reaching $141.1 million, marking a 179% increase year-over-year. The company also posted earnings per share (EPS) of $0.37, aligning with market expectations. Astera Labs has provided optimistic guidance for the first quarter of 2025, expecting revenues between $151 million and $155 million, which suggests a sequential growth of 7-10%. Stifel analysts have maintained a Buy rating with a $150 price target, citing the company’s exceptional revenue growth of 242.2% for the year 2024 and a positive outlook for 2025. Jefferies also reiterated a Buy rating with an $85 price target, highlighting the potential growth from Astera Labs’ Smart Cable Modules and the anticipated ramp-up of its Scorpio product line. Needham echoed this sentiment, maintaining a Buy rating and a $140 price target, emphasizing the strong sales of Astera Labs’ Taurus and Aries product lines. These developments reflect a strong market position for Astera Labs, driven by diverse product offerings and strategic growth initiatives.

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