NVIDIA shares fall 7% on short-seller's warning

Shares of NVIDIA (NVDA) fell 6.9% Wednesday after a short-seller cautioned that the chip maker for video games faces competition and might not maintain investor results that have made it one of 2016's top financial market fliers.

The Santa Clara, Ca.-based company's stock ended the trading day at $109.25 a share, down $8.07.  

Through Tuesday's market close, NVIDIA shares had been up roughly 250% for the year, making the stock one of the top performers in the S&P 500.

But the shares plunged after Citron Research, the newsletter of activist short-seller Andrew Left, on Wednesday tweeted a warning that the stock price would "head back to $90" in 2017. Left was among investors who in 2015 questioned the drug distribution and pricing policies of Valeant Pharmaceuticals International (VRX), leading to a plunge in the Canadian company's shares.

NVIDIA spokesman Robert Sherbin said the company declined to comment on the prediction.

As support for the bearish financial forecast, a note with the Citron Research tweet listed "6 risks that NVDA shareholders are discounting." Heading the list was the contention that much of NVIDIA's growth has come from gaming, and at the expense of tech rival Advanced Micro Devices, (AMD), "as opposed to new total addressable markets."

The note also cited "significant competition from existing and emerging players," including AMD and chipmaker giant Intel (INTC), along with existing NVIDIA customers Google (GOOGL) and Apple (AAPL).   

"As Intel competition enters the fray in mid-2017, this competition should have a significant impact on NVDA's gross margins," the note stated, before concluding: "Cautious Investing to All."

Nonetheless, NVIDIA has taken steps to expand its business by jumping into virtual reality, a fast growing tech frontier. In July, the company debuted VR Funhouse, an immersive collection of arcade-style mini carnival games designed to showcase the possibilities of virtual reality and NVIDIA's own technology.

Follow Paste BN reporter Kevin McCoy on Twitter: @kmccoynyc