Nvidia (NVDA) Stock Prices – Here’s Why

What happened:

Shares of leading graphics chip designer Nvidia ( NASDAQ:NVDA ) fell 6.5% in afternoon trading after prices continued to decline, suggesting investors are likely taking profits after a spectacular year-to-date run. Earlier this month (June 2024), Nvidia achieved a rare feat: it became the most valuable stock in the world, with a market capitalization of over $3 trillion and an annualized return of over 150% as of June 2024.

The recent declines suggest that some may be starting to think there is too much optimism in the share price. It is important to note that the company has not shown any recent shortcomings and its Q1 2024 results are quite strong and exceed expectations.

The quarter significantly exceeded Wall Street’s sales and profitability expectations, largely due to better-than-expected performance in the data center and automotive segments. Despite growing macro headwinds in the face of a cyclical downturn that has weighed down the performance of other semiconductor companies, Nvidia provided future revenue guidance ahead of Consensus, showing that demand for its products – especially its highly sought-after AI solutions – remains strong.

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What the market tells us:

Nvidia stock is highly volatile, with 11 moves greater than 5% over the past year. In the context of this, today’s move indicates that the market considers this news significant, but not something that would fundamentally change its perception of the business.

The previous big move we reported on occurred 27 days ago, when the company’s shares gained 7.5% on continued strong momentum following last week’s strong earnings report. This helped push the Nasdaq to record highs. The technology index crossed the 17,000 mark.

There was also positive news over the weekend. The Information reports that Elon Musk’s artificial intelligence company xAI has announced plans to purchase Nvidia AI chips for its new supercomputer. On Monday, May 27, 2024, xAI announced a Series B funding round on social media platform X.com (formerly Twitter). The AI ​​startup raised $6 billion to “bring the first xAI products to market” and “build advanced infrastructure.”

The story continues

According to reports, it is likely that the infrastructure development will lead to a massive computing system – dubbed a “computing gigafactory” – that is expected to use 100,000 semiconductors based on NVDA’s H100 graphics processor and is estimated to be four times larger than the largest existing cluster.

Overall, the report suggests that it’s still early days in the hot AI market, while providing a more definitive insight into the growing demand for Nvidia’s AI chips.

Nvidia is up 148% year-to-date, but at $119.60 per share it is still trading 11.8% below its 52-week high of $135.58 in June 2024. Investors who bought shares 5 years ago Nvidia for $1,000, they will now look at an investment worth $31,347.

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