What happened
Shares of power module specialist Vicor(NASDAQ: VICR) went dark on Wednesday afternoon, trading 21.4% lower as of 3:40 p.m. ET. Analyst firm CJS Securities downgraded the stock from market outperform to market perform. The analyst cited pictures showing a new artificial intelligence (AI) chip from Nvidia(NASDAQ: NVDA) that doesn't feature the distinctive golden boxes of Vicor power conversion chips that are found in earlier versions.
Image source: Getty Images.
So what
According to CJS analyst Jonathan Tanwanteng, Nvidia is Vicor's largest customer. Half of the growth in advanced power system sales may be lost if the graphics-chip designer removed these power control modules from its latest AI products. Tanwanteng also noted that Nvidia's hand might have been forced by limited supplies of Vicor's advanced products, and that high demand from other customers also could have played a part.
Now what
Furthermore, the analyst said that Vicor holds a unique advantage over the competition thanks to higher efficiency and density than anyone else. That should ensure a "commanding share" of the next-generation AI computing market. But the supply chain is so overloaded that clients could skip this generation of Vicor's product upgrades. That would be bad news for the company's profit margins as older and less lucrative chips start to cannibalize design slots that should have gone to the latest and greatest solution.
Formerly set to $150 per share, the firm's target price for Vicor's stock is under review. Share prices are down 63% from November's all-time highs, but the stock still trades at a lofty 62 times earnings and 502 times free cash flows.
10 stocks we like better than Vicor
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Vicor wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of March 3, 2022
Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns and recommends Nvidia. The Motley Fool has a disclosure policy.
