Nvidia, a leading technology company known for its graphics processing units (GPUs), has recently experienced a significant decline in its stock value. The company's stock fell by 6% in a single day, causing concern among investors and analysts alike.
There are several factors that may have contributed to this sudden drop in Nvidia's stock price. One possible reason could be the overall volatility of the stock market, as uncertainty surrounding global economic conditions continues to impact investor confidence.
Nvidia stock was on track for its worst day since last May on Tuesday ahead of the highflying chip maker’s earnings report on Wednesday.
Nvidia shares were down 5.4%, on track for their largest percent decrease since May 31, 2023, when they fell 5.7%, according to Dow Jones Market Data. Nvidia is currently down for four of the past five days.
The stock is still up 11.6% in February and 39% in 2024. Nvidia shares are up 232% in the past 12 months.
The Nasdaq Composite was down 1.3% in Tuesday morning trading, while the S&P 500 was down 0.7%. The Dow Jones Industrial Average was down just 46 points, or 0.1%. Nvidia, which has been a standout in the past year, was dragging on tech stocks, especially, on Tuesday.
Analysts are expecting a startling 240% increase in revenue from a year earlier to $20.6 billion for the period ending Jan. 28, according to LSEG, formerly known as Refinitiv. For every new dollar of sales the company generates, it’s squeezing out even more profit.
Net income likely surged more than sevenfold to $10.5 billion from $1.41 billion a year earlier. In the third quarter, Nvidia’s gross margin jumped to 74% from 53.6% the prior year.
Outsize growth is expected in Nvidia’s data center business, which includes its AI chips. Analysts project an almost fourfold increase in revenue on an annual basis to $17.06 billion, according to FactSet.
Even with today's pullback, Nvidia stock has risen roughly 218% over the last year. The company's explosive gains have largely been powered by surging AI-driven demand for its high-end GPUs, but expectations that the Fed will begin cutting interest rates in the near future have also played a major part in the rally.
If it looks like the central banking authority will push rate cuts further out, it could dampen bullish momentum for Nvidia. But in the ultra-near term, investors have a crucial event to narrow in on.
“We are particularly excited about Nvidia’s plans to launch the B100 later in 2024 and the X100 in 2025,” wrote Melius Research analyst Ben Reitzes, who recommends buying the stock, in a report last week. “If the upgrade from the A100 to the H100 is any indication, the Total Cost of Ownership benefit for data center operators will be enticing enough to fuel the upgrade and make 2025 a growth year.”
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