Nvidia’s shares fell nearly 3% Monday morning after Tristan Gerra, Baird analyst, downgraded it to Neutral (from Overweight).

Concerns include order cancellations for the consumer GPUs and excess inventories.

“While Nvidia sells at MSRP, pricing declines in GPUs post a pricing peak mid last year reflect on weakening demand, to the point where orders are now being impacted. Importantly Nvidia is not cutting wafer/substrate orders so far, as Nvidia has been supply restricted for the past 1.5 years and as data center demand remains very strong,” Gerra said in a client note.

He also believes that demand weakness may increase due to the expected fork this year.

As the Ethereum fork was anticipated late 2Q/early 3, it would further weaken demand trends. It would cause a substantial increase in second-hand graphic cards, which would pressurize pricing and reduce orders until at least the GeForce RTX 40 series gain momentum (not until C2023). During the 2018 peak, mining represented as much as 40% of total consumer GPU demand based on supply chain estimates,” the analyst added.

The analyst also added that investors are underestimating the impact of Russia on Nvidia as this area “likely represents a larger percentage of consumer GPU than the consensus view.”

Nvidia shares are now at $225.00 per share. This is a decrease of $360.00.

By Senad Karaahmetovic