Stock Story -
What Happened: Shares of leading designer of graphics chips Nvidia (NASDAQ:NVDA) fell 5.6% in the afternoon session after major indices declined, with the Nasdaq down 3%, while the S&P 500 fell by 1.7% following weaker-than-expected earnings from Alphabet (NASDAQ:GOOGL) (YouTube Advertising revenue missed estimates) and Tesla (NASDAQ:TSLA) (7% drop in auto revenue).
In recent weeks, tech giants, including Microsoft (NASDAQ:MSFT), Alphabet, Meta (NASDAQ:META), and Apple (NASDAQ:AAPL), have shed some of their year-to-date gains as a new market narrative—in favor of small-caps stocks—gains some momentum following the growing conviction that the Fed will start to cut rates in the second half of the year. Notably, the Russell 2000 index has gained 9% since the beginning of the month. The sentiment also benefitted from improved inflation prints last month, as the headline numbers edged closer to the Fed's 2% target.
Overall, the shift suggests investors are finding more reasons to hold positions in risk assets, especially small caps that tend to be more volatile.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Nvidia? Find out by reading the original article on StockStory, it's free.
What is the market telling us: Nvidia's shares are very volatile and over the last year have had 15 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 7 days ago, when the company dropped 6.1% after Bloomberg reported that the Biden Administration is planning to implement tighter trade restrictions if semiconductor companies continue granting China access to technologies made in the United States. The report follows ongoing trade tensions between both countries, which might raise uncertainty about market dynamics in the semiconductor segment heading into the new earnings season.
Nvidia is up 141% since the beginning of the year, but at $115.93 per share it is still trading 14.5% below 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 $25,955.
