Analyst Advises Against Buying NVIDIA Stocks

The IT industry can be a very ironic place, especially during times of economic turmoil. The past two years have led many companies to more or less 'extreme' measures, such as mass redundancies and mergers. Some, like Palm, were even forced to accept being bought off by bigger players. Meanwhile, the merciless game of the stock market has gone on as usual, with shares dropping or rising depending on what is likely to occur on a specific market.

The latest in ironic occurrences is a decision on the part of an analyst to downgrade a certain company's stocks. Specifically, Roth Capital down-ranked none other than NVIDIA from buy to hold. A month ago, SmarTrend noticed a downward trend for NVIDIA, after which is advised its subscribers to stealthily withdraw once the price dropped below $15. Since then, its market value fell by another 15.9 percent, closing at $12.70 on Thursday. Compared to the $18.01 from just half a month ago (April 15), this is a very significant decline.

Roth Capital believes that NVIDIA will keep declining, for the most part as a result of the European crisis. With a significant drop in demand imminent, a slowdown is the likeliest turn of events. This point of view is even supported by how the Santa Clara, California-based GPU maker's stock shed about 30% since the beginning of the year.

“Near-term business momentum is slowing. We believe that Europe has been weaker than expected, and business trends have been slow,” said Roth Capital analyst Arnab Chanda.

It should probably be noted that the European crisis has actually affected the entire IT sector, which means that Advanced Micro Devices and Intel Corp., among others, are also faced with difficulties ,especially with chip inventories exceeding actual market demand. Nevertheless, NVIDIA is the outfit that suffered most.