Stock Story -
What Happened: Shares of leading designer of graphics chips Nvidia (NASDAQ:NVDA) jumped 6.4% in the afternoon session after the stock rebounded after shedding more than $400b in market cap since the previous week. We'd note that there were no specific fundamental reasons driving today's move, just as there were no major ones driving the decline in the stock in the last week or so. The last major fundamental datapoint we have on the company was May 22, 2024, when Nvidia reported Q1'2024 earnings that were quite strong and above expectations.
Yesterday, shares fell more than 5%, suggesting investors were taking profits following a spectacular year-to-date run. Today could be a change in sentiment, with some investors thinking that recent weakness in the stock is overdone and that this is still a name to own.
Nvidia attained a rare feat earlier in the month (June 2024): It became the most valuable stock in the world, with a market cap of more than $ 3 trillion and a year-to-date return in excess of 150% in June 2024. After the initial pop the shares cooled down to $123.92, up 5% from previous close.
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What is the market telling us: Nvidia's shares are very volatile and over the last year have had 12 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was about 23 hours ago, when the company dropped 6.5% as the stock continued to pull back, suggesting investors are likely taking profits following a spectacular year-to-date run. Nvidia attained a rare feat earlier in the month (June 2024): It became the most valuable stock in the world, with a market cap of more than $3 trillion and a year-to-date return in excess of 150% in June 2024.
The recent declines suggested that some may be beginning to think that too much optimism is priced into the stock. We'd note that the company hasn't shown any blemishes lately, with Q1'2024 earnings coming in quite strong and above expectations.
The quarter specifically blew past Wall Street's sales and profitability expectations, mostly due to better-than-expected results in its data center and automotive segments. Despite growing macro headwinds amid a cyclical downturn, which has dampened the performance of other semiconductor companies, Nvidia provided forward revenue guidance ahead of Consensus, demonstrating that demand for its products—especially its much-coveted AI solutions—remains strong.
Nvidia is up 158% since the beginning of the year, and at $123.92 per share it is trading close to its 52-week high of $135.58 from June 2024. Investors who bought $1,000 worth of Nvidia's shares 5 years ago would now be looking at an investment worth $32,768.
