As the Nvidia share price nosedives again, should I be worried?

After another significant fall in the Nvidia share price, our writer considers what the implications are for his own portfolio.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: NVIDIA

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Yesterday (3 September), the Nvidia (NASDAQ:NVDA) share price fell 9%.

Normally, I wouldn’t pay too much attention to such movements. Although I do have a small exposure to the company via an artificial intelligence investment trust, I accept that stock prices will fluctuate from one day to the next. It’s the long-term trend that’s of more interest to me.

But Nvidia seems to have a hold over the market that’s making me nervous.

It used to be said that if America catches a cold, the whole world sneezes. In other words, if the US economy starts to falter, the effects will be felt everywhere.

Now it seems that if the chipmaker’s share price wobbles, entire stock markets move into the red. And that affects everyone, including me.

Going from strength to strength

But as frustrating as I find this, I have sympathy with Nvidia’s shareholders. Life must seem very unfair to them.

Last Wednesday (28 August), the company’s share price fell 6% in after-hours trading following the announcement of its results for the three months ended 28 July 2024.

Given the market’s reaction, you’d have thought it was bad news.

Not so. In fact, it comfortably beat expectations — again.

During the quarter, it reported revenue of $30bn, compared to the consensus of analysts’ forecasts of $28.7bn. Similarly, earnings per share were 68 cents — 3 cents higher than expected.

Nobody could really explain the reaction of investors. Eventually, most journalists seemed to settle on the line that although the results were good, they weren’t better than the most bullish of estimates.

But are we really to accept that $175bn was wiped off its valuation because one analyst decided to be much more optimistic than the others? I suspect the truth of the matter is that many shareholders wanted to bank some profits.

Prior to the announcement, the company’s share price had increased 160% since the beginning of 2024. And earnings releases are often a time when investors take stock of their portfolio and decide whether to buy or sell.

But despite the recent turbulence, it’s easy to forget that the over the past month, its stock price is still up 7%.

And its current market cap is higher than the combined value of the FTSE 100.

Out of my control

Unfortunately, there’s nothing I can do about the apparent obsession with Nvidia’s stock price. But history tells me that — eventually — people will lose interest and attention will move elsewhere.

The American giant’s growth will inevitably slow as markets become more saturated and competitors start to get a foothold. And there’s no guarantee that it will be able to come up with new, innovative designs. For example, there are some doubts as to whether its new Blackwell chip will be as successful as its predecessors.  

But don’t get me wrong, I think it’s a great company that will continue to deliver over the long term, albeit at a much slower pace.

I think it will succeed because it makes the hardware used by the artificial intelligence industry. There’s still some uncertainty as to who will be able to make the most money from the software side but all of these applications will require semiconductors to function.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Beard has no position in any of the shares mentioned. The Motley Fool UK has recommended Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »

Growth Shares

As the boohoo share price falls, could it become a penny stock in 2025?

Jon Smith outlines some of the recent problems involving the boohoo share price and considers if things could get even…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Here are the worst-performing FTSE 100 shares over the last 5 years

These five FTSE 100 shares have been complete duds over the last half decade. But is there potential for a…

Read more »

Investing Articles

Nvidia stock has tripled this year! Can it keep rising?

Nvidia's latest sales update showed strong growth and the stock's been on a tear so far in 2024. So is…

Read more »