Why Nvidia Stock Popped on Monday
What happened
Shares of semiconductors giant Nvidia (NASDAQ: NVDA) jumped in Monday afternoon trading, eventually closing the day up 2.4%.
There's no obvious news on the wires concerning Nvidia per se today, but there was some news affecting semiconductor stocks in general.
Image source: Getty Images.
So what
Specifically, over the weekend, Focus Taiwan reported that a temporary shutdown of 3M's semiconductor coolant plant in Zwijndrecht, Belgium, that was first announced in early March, "could have a major impact on the global semiconductor industry."
On Friday, BusinessKorea confirmed that this plant, which "accounts for 80 percent of the global total semiconductor coolant output ... has been closed indefinitely under tightened local environmental regulations." Semiconductor coolant isn't something that investors think much about. But it's used in the production of microchips during the etching process, and a supply interruption could therefore affect customers including Samsung, SK Hynix, Intel, and Taiwan Semiconductor (NYSE: TSM) -- a contract manufacturer for Nvidia chips.
Now what
According to Focus Taiwan, 3M has somewhere between a one and three months' supply of coolant on hand. But after that runs out -- and assuming the Belgian plant doesn't get back up and running before then -- this could throw another monkey wrench into the semiconductor chip supply chain, constricting supply and driving prices higher.
Whether this ends up meaning higher input costs for Nvidia, supplies constrained to the extent that this affects the company's ability to make sales, or prices kept elevated remains to be seen. As for today, investors seem to be betting on the latter, as yet another factor must now be weighed into the prospects for when the already years-long global semiconductor shortage might finally be resolved.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool recommends 3M. The Motley Fool has a disclosure policy.
