We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
NVIDIA (NVDA) Plunges 21% in a Month: Should You Buy the Stock?
Read MoreHide Full Article
NVIDIA Corporation (NVDA - Free Report) , a heavyweight in the semiconductor industry, has seen its stock tumble over 21% in the past month. This drop significantly outpaces the 14.1% and 7.3% declines of the Zacks Computer and Technology sector and the S&P 500, respectively.
From reaching all-time highs in June and becoming one of the world’s most valuable companies, NVIDIA's stock has taken a sharp turn downward. The recent fall has put investors at a crossroads, raising the question: is it time to buy, hold or sell?
One-Month Price Performance
Image Source: Zacks Investment Research
What Triggered the Recent Sell-Off?
Several factors have contributed to NVIDIA's recent downturn. The broader market has been jittery due to concerns over the Federal Reserve's interest rate policies and fears of a looming U.S. recession. These macroeconomic worries have certainly weighed on tech stocks, including NVIDIA.
A significant factor specific to NVIDIA is the U.S. government's tightening restrictions on exporting advanced AI chips to China. While these measures aim to curb the military capabilities of China, they also threaten a substantial revenue stream for NVIDIA, given China's demand for cutting-edge AI technology.
Additionally, reports of delays in the delivery of NVIDIA's highly anticipated AI chips, codenamed Blackwell, have stirred unease. According to The Information, these delays are due to design flaws and could set back delivery by three months or more, affecting major customers like Microsoft Corporation (MSFT - Free Report) , Amazon.com, Inc. (AMZN - Free Report) , Alphabet and Meta Platforms. Such delays could push potential customers toward competitors like Advanced Micro Devices, Inc. (AMD - Free Report) , further denting NVIDIA's near-term outlook.
Trading Below Key Moving Average
Adding to investors’ concerns, NVIDIA shares have dipped below their 50-day moving average, a technical indicator often seen as a bearish signal. This movement suggests a potential continuation of the downward trend, at least in the short term.
50-Day Moving Average
Image Source: Zacks Investment Research
Lofty Valuation
Despite NVIDIA's strong fundamentals, its valuation remains a point of contention. The stock's current price-to-sales (P/S) ratio is significantly higher than the Zacks Semiconductor - General industry average, indicating that much of its expected growth is already factored into the stock price. This leaves little room for error and makes the stock particularly vulnerable to any negative developments or earnings misses.
Image Source: Zacks Investment Research
Long-Term Prospects Remain Bright
Despite near-term challenges, it's not all doom and gloom for NVIDIA. The company has been a standout performer. In the last reported financial results for the first quarter of fiscal 2025, it registered a staggering 262% increase in revenues and a more than five-fold rise in non-GAAP EPS. NVIDIA's leadership in graphic processing units (GPUs) for gaming, data centers and professional visualization continues to drive its growth.
Looking forward, NVIDIA is well-positioned to capitalize on several key trends, including artificial intelligence, autonomous vehicles and the burgeoning metaverse. These technologies are expected to see substantial growth, providing a strong demand base for NVIDIA’s advanced chips. The company's revenue forecast for the second quarter stands at $28 billion, a significant leap from $13.51 billion in the same quarter last year.
Impressive Long-Term Projections
Analysts remain optimistic about NVIDIA's future. The Zacks Consensus Estimate projects a 93.4% year-over-year increase in revenues and a 106.9% rise in earnings for fiscal 2025. Moreover, the long-term earnings growth rate is pegged at an impressive 37.6% compared to the industry average of 18.9%. This bullish sentiment is reflected in upward revisions for the company's earnings estimates.
Image Source: Zacks Investment Research
Final Thoughts
Given the recent volatility and potential challenges ahead, investors might consider waiting for a more favorable entry point. While this Zacks Rank #3 (Hold) company's long-term growth story remains compelling, issues like product delays, lofty valuations and macroeconomic headwinds suggest that now may not be the ideal time to buy aggressively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For current shareholders, holding on to the stock seems prudent, as the company’s fundamental strengths and growth drivers are intact. However, new investors should consider waiting for a more attractive entry point, possibly on further dips, to ensure they are not overpaying for future growth.
In summary, NVIDIA remains a dominant force in its key markets, but the current environment suggests a cautious stance. It’s a stock worth holding, but potential buyers might find better opportunities by waiting for a lower entry price.
See More Zacks Research for These Tickers
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
NVIDIA (NVDA) Plunges 21% in a Month: Should You Buy the Stock?
NVIDIA Corporation (NVDA - Free Report) , a heavyweight in the semiconductor industry, has seen its stock tumble over 21% in the past month. This drop significantly outpaces the 14.1% and 7.3% declines of the Zacks Computer and Technology sector and the S&P 500, respectively.
From reaching all-time highs in June and becoming one of the world’s most valuable companies, NVIDIA's stock has taken a sharp turn downward. The recent fall has put investors at a crossroads, raising the question: is it time to buy, hold or sell?
One-Month Price Performance
Image Source: Zacks Investment Research
What Triggered the Recent Sell-Off?
Several factors have contributed to NVIDIA's recent downturn. The broader market has been jittery due to concerns over the Federal Reserve's interest rate policies and fears of a looming U.S. recession. These macroeconomic worries have certainly weighed on tech stocks, including NVIDIA.
A significant factor specific to NVIDIA is the U.S. government's tightening restrictions on exporting advanced AI chips to China. While these measures aim to curb the military capabilities of China, they also threaten a substantial revenue stream for NVIDIA, given China's demand for cutting-edge AI technology.
Additionally, reports of delays in the delivery of NVIDIA's highly anticipated AI chips, codenamed Blackwell, have stirred unease. According to The Information, these delays are due to design flaws and could set back delivery by three months or more, affecting major customers like Microsoft Corporation (MSFT - Free Report) , Amazon.com, Inc. (AMZN - Free Report) , Alphabet and Meta Platforms. Such delays could push potential customers toward competitors like Advanced Micro Devices, Inc. (AMD - Free Report) , further denting NVIDIA's near-term outlook.
Trading Below Key Moving Average
Adding to investors’ concerns, NVIDIA shares have dipped below their 50-day moving average, a technical indicator often seen as a bearish signal. This movement suggests a potential continuation of the downward trend, at least in the short term.
50-Day Moving Average
Image Source: Zacks Investment Research
Lofty Valuation
Despite NVIDIA's strong fundamentals, its valuation remains a point of contention. The stock's current price-to-sales (P/S) ratio is significantly higher than the Zacks Semiconductor - General industry average, indicating that much of its expected growth is already factored into the stock price. This leaves little room for error and makes the stock particularly vulnerable to any negative developments or earnings misses.
Image Source: Zacks Investment Research
Long-Term Prospects Remain Bright
Despite near-term challenges, it's not all doom and gloom for NVIDIA. The company has been a standout performer. In the last reported financial results for the first quarter of fiscal 2025, it registered a staggering 262% increase in revenues and a more than five-fold rise in non-GAAP EPS. NVIDIA's leadership in graphic processing units (GPUs) for gaming, data centers and professional visualization continues to drive its growth.
Looking forward, NVIDIA is well-positioned to capitalize on several key trends, including artificial intelligence, autonomous vehicles and the burgeoning metaverse. These technologies are expected to see substantial growth, providing a strong demand base for NVIDIA’s advanced chips. The company's revenue forecast for the second quarter stands at $28 billion, a significant leap from $13.51 billion in the same quarter last year.
Impressive Long-Term Projections
Analysts remain optimistic about NVIDIA's future. The Zacks Consensus Estimate projects a 93.4% year-over-year increase in revenues and a 106.9% rise in earnings for fiscal 2025. Moreover, the long-term earnings growth rate is pegged at an impressive 37.6% compared to the industry average of 18.9%. This bullish sentiment is reflected in upward revisions for the company's earnings estimates.
Image Source: Zacks Investment Research
Final Thoughts
Given the recent volatility and potential challenges ahead, investors might consider waiting for a more favorable entry point. While this Zacks Rank #3 (Hold) company's long-term growth story remains compelling, issues like product delays, lofty valuations and macroeconomic headwinds suggest that now may not be the ideal time to buy aggressively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For current shareholders, holding on to the stock seems prudent, as the company’s fundamental strengths and growth drivers are intact. However, new investors should consider waiting for a more attractive entry point, possibly on further dips, to ensure they are not overpaying for future growth.
In summary, NVIDIA remains a dominant force in its key markets, but the current environment suggests a cautious stance. It’s a stock worth holding, but potential buyers might find better opportunities by waiting for a lower entry price.