Nvidia Stock Hits Lowest Level Since Mid-August Amid Market Volatility
Overview
The Nvidia stock (NVDA) continued its downward trend on Wednesday, extending losses to over 9% after closing at $108. The market decline was felt across various sectors, with technology stocks leading the way.
Pre-Market Trading: Another 3% Drop
In pre-market trading, Nvidia shares fell an additional 3%, as investors digested the latest developments in the company’s investigation by the Department of Justice (DOJ). The DOJ has sent subpoenas to Nvidia and other companies, seeking evidence that the chipmaker may have violated antitrust laws.
Magnificent Seven: Worst Performer
Nvidia was the worst performer among the ‘Magnificent Seven’ stocks on Tuesday, falling to its lowest level since August 12. This decline comes despite the company’s recent quarterly results beating consensus estimates.
Market Decline
The overall market declined on the first trading day of the month, with technology (XLK) stocks leading the way followed by Energy (XLE) and Industrials (XLI). The decline is attributed to a combination of factors, including investor concerns over inflation, interest rates, and economic growth.
Expert Analysis
Stacy Rasgon, senior analyst at Bernstein, provided insight into the market’s performance. "I don’t think it’s down on isolation; lots of things are down today," he said in a live interview with Yahoo Finance. Rasgon attributed the decline to a broader market correction rather than any specific issue with Nvidia.
Quarterly Results: A Mixed Bag
Nvidia’s quarterly results were a mixed bag, beating consensus estimates but failing to send the stock price higher. The company guided gross margins down slightly for the remainder of the year, which was seen as a negative by some analysts.
Gross Margins: A Key Concern
Rasgon explained that while revenue was strong, the issue people had with Nvidia’s quarterly results was the decrease in gross margins. "The print was actually very good. The issue people had on it was not so much the revenue, it was the gross margins," he said.
Next-Generation Blackwell Chip: A Potential Game-Changer
Rasgon also highlighted the potential impact of Nvidia’s next-generation Blackwell chip, which is expected to be released in the fourth quarter of this year. "I think right now people are worried, kind of [treading] water a little bit until those products get into the marketplace," he said.
Market Expectations
Rasgon believes that once the new Blackwell chip starts ramping up production, Nvidia’s stock price will likely follow suit. "Once they start ramping Q4, Q1 … if that ramp is solid, I expect the stock would probably follow," he said.
Wall Street Remains Bullish
Despite Tuesday’s losses, Wall Street remains mostly bullish on the stock. Stifel analysts reiterated their Buy rating and $165 price target following the earnings release. The analysts noted that Nvidia remains the primary beneficiary of the modernization of data center compute.
Bigger Picture: Data Center Compute Modernization
The analysts at Stifel emphasized the significance of the modernization of data center compute in driving growth for Nvidia. "Bigger picture, the modernization of data center compute continues and, in our view, NVDA remains the primary beneficiary," they wrote.
Recent Performance
Nvidia had been leading the recent rebound in stocks, climbing nearly 25% over a span of three weeks following a global market sell-off. Despite Tuesday’s losses, the stock is up more than 115% year to date.
Conclusion
The decline in Nvidia’s stock price on Wednesday highlights the challenges faced by investors as they navigate a complex and rapidly changing market landscape. As technology continues to evolve at an unprecedented pace, it is essential for individual investors to stay informed and adapt to new developments in order to beat the market.
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