The Curious Reason Nvidia Stock Slumped on Thursday
What happened
Shares of Nvidia (NASDAQ: NVDA) continued the downturn that has weighed on the stock much of this week. On Thursday, the stock fell as much as 2.9%. As of 12:30 p.m. ET, shares were still down 2.2%.
Many stocks were down, which no doubt added fuel to Nvidia's decline. The curious thing about today's move is that it came despite some positive comments about the state of the semiconductor industry in general, while specifically mentioning Nvidia.
So what
Credit Suisse analyst John Pitzer said he believes there is upside in the chip industry in the wake of negative investor sentiment so far this year, according to The Fly.
Image source: Nvidia.
The bullish comments came in the wake of positive results from Taiwan Semiconductor (NYSE: TSM), which is by far the world's largest semiconductor manufacturer. The company generated first-quarter revenue of $17.57 billion, which climbed 36% year over year, while also increasing 11.6% sequentially. Profits were robust as earnings per share of $1.40 increased 45%. Both metrics easily exceeded Wall Street's consensus estimates, which clocked in at $16.7 billion and $1.27, respectively.
Pitzer said the results suggest upside for the U.S. semiconductor industry, as chip stocks followed by the analyst have fallen 21% so far this year. He specifically highlighted Taiwan Semiconductor's biggest customers, which include Apple, Advanced Micro Devices, Intel, and Nvidia, saying that the results may represent a "tactical reprieve from recent trading patterns."
Now what
Fears regarding supply chain constraints and chip shortages have plagued the industry so far this year, but Taiwan Semiconductor's results suggest that the pinch may be easing, which would be good news for Nvidia.
Only time will tell whether the worst of the chip shortage has passed. That said, for long-term investors, there are plenty of reasons to own Nvidia stock. In the fourth quarter, Nvidia generated record revenue of $7.64 billion, up 53% year over year, as earnings per share of $1.18 surged 103%.
Given the transitory nature of any chip shortage, Nvidia stock is a buy for savvy investors.
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Danny Vena owns Apple and Nvidia. The Motley Fool owns and recommends Advanced Micro Devices, Apple, Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel, long March 2023 $120 calls on Apple, short January 2023 $57.50 puts on Intel, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
