Nvidia (Nasdaq:NVDA) Outlook Less Certain After Share Run-Up

Shares of Nvidia (Nasdaq:NVDA) are up over 50 percent in 2011, soaring over the first couple of weeks of the year. That has resulted in a downgrade, as the company pulled back after being considered fully priced. The chip sector is also viewed as being weak going forward.

Canaccord Genuity says, "A major Wall Street bank downgraded the graphics card maker yesterday, ending the shares' three- week climb. Nvidia has been rallying since early January, already boasting gains of 50% on the year, after it announced it would begin developing central processors for PCs based on the ARM architecture, and that it had won a $1.5-billion dollar settlement with Intel (Nasdaq: INTC) that marked the close of a five-year legal tiff. But that upward momentum ended when a bank analyst said the company’s risk-reward ratio is not nearly as compelling now as it was before. 'When we upgraded the stock, we had firmly believed that Nvidia was an underpriced asset, with a fundamental tailwind that the market was missing,' wrote the analyst. 'We now believe that, fundamentally, the company's position both in its core business and in the emerging Tegra business is fairly well understood and is now reflected in the stock.' While the bank downgraded Nvidia individually, it also articulated a bearish view for the chip sector as a whole, suggesting companies like Nvidia are struggling to adapt to a growing market for tablet computers and smartphones."

Nvidia (NVDA) was trading at $22.49, down $0.55, or 2.40 percent, as of 1.01 PM EST.