Tech investors were rattled after Nvidia (NVDA) set off a big alarm.

The graphic chip supplier to the PC industry on Wednesday slashed its second-quarter sales forecast to about $912 million, 17% below analysts’ estimates. It also said it would take a $150 million to $200 million charge to cover replacement costs of defective chips.



The warning sent Nvidia shares down 31% Thursday and added more pressure to the Nasdaq, which fell 2%, and is now down more than 9% in the past month.

But some analysts think investors overreacted by sending tech stocks down on Nvidia’s warning. The company’s problems appear to be specific to Nvidia.

“While the company attributed a portion of the miss to global end market weakness, our checks indicate component demand from other chip companies touching the PC end market is stable,” JPMorgan analyst Shawn Webster wrote in a report Wednesday.

No.2 rival AMD (AMD), which fell 1% Thursday, likely saw solid demand for graphics chips and probably took some of Nvidia’ business in the quarter, analysts says.

Webster downgraded the stock to neutral from buy after concluding that many of Nvidia’s problems are company-specific. He says Nvidia started the quarter with a pile of excess graphics chips. This surplus was compounded by increased competition as rivals took market share and capitalized on a shift among computer makers from separate graphics cards to integrated-graphics chips. Nvidia, which commands 80% of the graphics processor market, mostly sells separate graphics cards.

Nvidia spread the blame for the sharp sales decline on a number of factors, including a replacement of bad chips, a soft economy, product delays and price competition. “There’s a bit of ‘and-the-kitchen-sink’ to this,” says one Wall Street analyst.

“We knew that the July quarter was going to be choppy, but we didn’t expect this magnitude of bad news so early,” Cowen analyst Dan Berenbaum wrote in a note Thursday, referring to the four weeks of business yet to book in Nvidia’s second quarter ending July 31.

Berenbaum says the stock is trading like the company is at death’s door, but he argues that “the near-term difficulties do not mean that Nvidia is in secular decline.”