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What took place
The tech-significant Nasdaq took off like a rocket this morning, and took semiconductor stock Nvidia (NASDAQ:NVDA) alongside for the trip. Just following midday ET, nevertheless, the rally started out to sputter, and by the time buying and selling for the day was done, not only had the Nasdaq given up all its gains, but Nvidia inventory closed down 3.7% for the day.
So what went improper? In the circumstance of the Nasdaq as a whole, I concern that buyers could have jumped the gun, presuming that following the Nasdaq met the definition for a stock current market correction (down 10% from its significant), the mild would switch eco-friendly for tech shares to resume marching greater again.
No this kind of luck.
Nvidia in specific, meanwhile, had some negative semiconductor-certain information to contend with now. As TheFly.com described this early morning, expense banker Piper Sandler downgraded shares of Nvidia rival State-of-the-art Micro Devices (NASDAQ:AMD) to neutral.
In its notice, Piper warned that source of and need for pc chips in the automotive sector could get to parity in the second fifty percent of this year. Although this is a generalized dilemma for several semiconductor firms, it would also dent pricing power in this growing element of Nvidia’s small business. Also, Piper warned that Pc income seem to be to be slowing in 2022, which could even more dent earnings, and decrease trader enthusiasm for “superior-numerous, large-advancement know-how shares.”
“Large-multiple, higher-progress technological innovation shares.” Does that seem like any person we know?
I necessarily mean certain, on the deal with of it this was a notice about AMD, and at a P/E ratio of extra than 42, AMD inventory surely meets the definition of a significant-various tech stock (with high predicted growth to match — analysts are forecasting 40% compound yearly earnings expansion in excess of the subsequent five a long time). It appears to me, even though, that Nvidia is in an even extra precarious posture, what with its P/E getting a lot more than two times AMD’s, and predicated on similarly intense progress anticipations.
Lengthy story short, except and until buyers shake off their dread of investing in highly-priced stocks, Nvidia shares could continue being at threat.
This posting represents the impression of the author, who may perhaps disagree with the “official” suggestion place of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even a single of our individual — will help us all assume critically about investing and make selections that help us grow to be smarter, happier, and richer.