Nvidia Stock Fluctuates Amid AI Chip Developments and Market Challenges

Why Nvidia Stock Is Sinking Again Today

Nvidia (NASDAQ: NVDA) stock is falling in Wednesday's trading. The company's share price was down 5.5% of 2:45 p.m. ET, according to data from S&P Global Market Intelligence. Meanwhile, the S&P 500 index had fallen 2.2% and the Nasdaq Composite was down 3.3%. Nvidia stock is losing ground in conjunction with recent earnings reports from two of the world's biggest and most influential companies. Alphabet and Tesla each issued second-quarter results and guidance yesterday, and the reports kicked off a substantial pullback across the stock market. Earnings season gets off to a rocky start for the "Magnificent Seven" Earnings season is underway, and Alphabet and Tesla were the first members of the "Magnificent Seven" to report earnings. The group, which also includes Nvidia, Apple, Microsoft, Amazon, and Meta Platforms, is highly influential when it comes to shaping overall stock market sentiment. Unfortunately, Wall Street wasn't impressed with either of yesterday's most high-profile quarterly reports. While Alphabet's Q2 report arrived with sales and earnings that beat Wall Street's targets, the company expects that costs will rise in the near term. Management expects the business's operating income margin will slip on a sequential basis due to increased infrastructure investments and depreciation. All in all, it was actually a very strong second quarter for the Google parent, but a moderate delay for profit growth seems to have spooked the market. Tesla's report was more concerning. While the company managed to post revenue of $25.5 billion and beat the average analyst estimate by $760 million in the quarter, profits fell short. The company posted non-GAAP (adjusted) earnings per share of $0.52, missing Wall Street's target for per-share earnings of $0.62. Price cuts have helped sales, but margins are slipping, and it looks like the business could face some continued inventory issues. Alphabet stock was down 4.9% as of this writing. Meanwhile, Tesla was down 10.9%. The recent reports have some silver linings for Nvidia But there was actually some good news for Nvidia in both of these reports. Google Cloud revenue rose 29% year over year to reach $10.35 billion in Q2, which tracks with demand for the GPU leader's tech continuing to be robust. While the market was concerned about Alphabet's rising infrastructure spending, there's a fair chance this is actually a bullish signal for Nvidia. Tesla is also spending heavily on artificial intelligence (AI) and will continue to do so according to comments in its quarterly call. With growth for the company's auto business stalling, investors aren't thrilled with the costs associated with perfecting autonomous driving and other artificial intelligence initiatives. But it seems unlikely that CEO Elon Musk will let off the gas, and the company should continue to be an eager Nvidia customer. The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Nvidia wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $751,180!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Why Nvidia Stock Is Sinking Again Today | The Motley Fool

Nvidia (NVDA -6.26%) stock is falling in Wednesday's trading. The company's share price was down 5.5% of 2:45 p.m. ET, according to data from S&P Global Market Intelligence. Meanwhile, the S&P 500 index had fallen 2.2% and the Nasdaq Composite was down 3.3%. Nvidia stock is losing ground in conjunction with recent earnings reports from two of the world's biggest and most influential companies. Alphabet and Tesla each issued second-quarter results and guidance yesterday, and the reports kicked off a substantial pullback across the stock market. Earnings season is underway, and Alphabet and Tesla were the first members of the "Magnificent Seven" to report earnings. The group, which also includes Nvidia, Apple, Microsoft, Amazon, and Meta Platforms, is highly influential when it comes to shaping overall stock market sentiment. Unfortunately, Wall Street wasn't impressed with either of yesterday's most high-profile quarterly reports. While Alphabet's Q2 report arrived with sales and earnings that beat Wall Street's targets, the company expects that costs will rise in the near term. Management expects the business's operating income margin will slip on a sequential basis due to increased infrastructure investments and depreciation. All in all, it was actually a very strong second quarter for the Google parent, but a moderate delay for profit growth seems to have spooked the market. Tesla's report was more concerning. While the company managed to post revenue of $25.5 billion and beat the average analyst estimate by $760 million in the quarter, profits fell short. The company posted non-GAAP (adjusted) earnings per share of $0.52, missing Wall Street's target for per-share earnings of $0.62. Price cuts have helped sales, but margins are slipping, and it looks like the business could face some continued inventory issues. Alphabet stock was down 4.9% as of this writing. Meanwhile, Tesla was down 10.9%. But there was actually some good news for Nvidia in both of these reports. Google Cloud revenue rose 29% year over year to reach $10.35 billion in Q2, which tracks with demand for the GPU leader's tech continuing to be robust. While the market was concerned about Alphabet's rising infrastructure spending, there's a fair chance this is actually a bullish signal for Nvidia. Tesla is also spending heavily on artificial intelligence (AI) and will continue to do so according to comments in its quarterly call. With growth for the company's auto business stalling, investors aren't thrilled with the costs associated with perfecting autonomous driving and other artificial intelligence initiatives. But it seems unlikely that CEO Elon Musk will let off the gas, and the company should continue to be an eager Nvidia customer.

Forget the Stock Split: 2 Better Reasons to Buy Nvidia Stock Right Now

Nvidia (NASDAQ: NVDA) was a $360 billion company at the start of 2023, but thanks to a whopping 745% gain in its stock price, the company is now worth over $3 trillion. It's experiencing a surge in demand for its data center chips, which are the most powerful in the industry for processing artificial intelligence (AI) workloads. In June, Nvidia stock was trading at over $1,200 per share, which made it somewhat inaccessible to smaller investors, so management executed a 10-for-1 stock split effective June 10. The split increased the number of shares in circulation tenfold and organically shrank the price per share by 90%. It hasn't changed the underlying value of the company, but investors can now buy one share of Nvidia for just $123 (as of this writing). Stocks can sometimes get a boost after they split as a broader investor base swoops in to buy, but that alone isn't a good reason to pile into Nvidia. Investors should focus on the company's fundamentals instead, and here are two great reasons to buy the stock. Nvidia CEO Jensen Huang estimates there will be around $1 trillion in spending on data centers over the next five years as operators try to meet demand for computing capacity from AI developers. Nvidia's H100 graphics processing unit (GPU) set the standard for AI chips, and as a result, the company has a market share of more than 90% in the segment. That allows Nvidia to charge a premium for its chips, which is driving incredible growth in its revenue and earnings. In the recent fiscal 2025 Q1 (ended April 28), the company generated a record $22.6 billion in data center revenue alone, which was a 427% increase from the year-ago period. It marked the fourth consecutive quarter of triple-digit percentage growth in the data center segment. Nvidia's Q1 earnings per share soared 461% to $6.12 as the company's gross profit margin continued to climb, reaching 78.9%. Three years ago -- before the AI boom started and gaming was Nvidia's largest segment -- its gross profit margin was around 66%. That highlights just how profitable the company's data center GPUs are, thanks in part to its pricing power. Demand is unlikely to slow in the foreseeable future. While the H100 is still a popular GPU, Nvidia has since released the faster H200. Plus, the company is ramping up production of a new generation of GPUs based on its Blackwell architecture. The GB200, for example, is capable of performing AI inference at five times the speed of the H100. That means developers can build their models much faster, and considering they often pay for computing capacity by the minute, that translates to significant cost savings. Competition is growing, though. Advanced Micro Devices recently started shipping its MI300 data center GPU, which has shown performance advantages over the H100, and it's already attracting many of Nvidia's biggest customers. Although AMD is unlikely to compete with new chips like the GB200 any time soon, any market share it snatches from Nvidia could pressure the latter's coveted pricing power. 2. Despite blistering gains, Nvidia stock still might be cheap As I mentioned, Nvidia stock is up 745% since the start of 2023. But it might still be cheap, at least by the widely used price-to-earnings (P/E) ratio, which divides a company's share price by one year's worth of its earnings per share. Investors often use that metric to measure the value of a stock relative to the rest of the market. Nvidia generated $1.80 in earnings per share over the last four quarters (adjusted for the stock split), and based on its stock price of $123.54 at the time of this writing, it trades at a P/E ratio of 68.6. That's more than double the 31.9 P/E ratio of the Nasdaq-100 index, implying Nvidia is extremely expensive relative to its peers in the tech sector. However, investors are willing to pay a premium for Nvidia because its earnings are rapidly catching up to its surging stock price. For example, Wall Street analysts predict Nvidia will generate $2.72 in earnings per share for the fiscal 2025 full year, giving the stock a forward P/E ratio of 45.4. They also forecast $3.74 in earnings during fiscal 2026, translating into a forward P/E ratio of 33. In other words, Nvidia shares don't look very expensive relative to the Nasdaq-100 as long as investors are willing to hold onto them for at least the next two years. Of course, there is a risk Wall Street is overestimating Nvidia's earnings potential, in which case the stock is more expensive than it currently appears. Further upside in Nvidia stock isn't a given Last year, Goldman Sachs released a report suggesting generative AI could add $7 trillion to the global economy over the coming decade. However, last month, the investment bank issued a new report expressing concerns over the lack of a "killer app," implying companies are struggling to deliver a payoff for all of the money they have spent developing AI so far. Huang's forecast for $1 trillion in data center spending over the next five years could be in jeopardy if Goldman's concerns begin to spread through the tech sector. That would directly impact demand for Nvidia's GPUs and drive a slowdown in the company's growth. But I think there is another reason Nvidia investors should be cautious. Artificial general intelligence (AGI) describes the moment when AI matches human intelligence in most cognitive tasks. Some researchers -- including one who worked for ChatGPT creator OpenAI -- believe AGI could be achieved as soon as 2027 based on the rapid pace of development right now. Developing AI beyond the point of AGI could yield diminishing returns, because the number of commercial workloads that could benefit from such a high degree of machine intelligence is probably very small. If that's the case, demand for Nvidia's GPUs could plummet because the number of developers who want (or can afford) further performance increases will probably shrink. Nvidia operates a fantastic business and it's a clear-cut leader in the market for AI data center chips, but investors who buy the stock today should do so with their eyes wide open to the potential risks, because further blockbuster returns are not a given. The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Nvidia wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $757,001!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Goldman Sachs Group, and Nvidia. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Forget the Stock Split: 2 Better Reasons to Buy Nvidia Stock Right Now | The Motley Fool

There is a long list of reasons to buy Nvidia stock, but investors shouldn't ignore the potential headwinds that could be ahead. Nvidia (NVDA -0.77%) was a $360 billion company at the start of 2023, but thanks to a whopping 745% gain in its stock price, the company is now worth over $3 trillion. It's experiencing a surge in demand for its data center chips, which are the most powerful in the industry for processing artificial intelligence (AI) workloads. In June, Nvidia stock was trading at over $1,200 per share, which made it somewhat inaccessible to smaller investors, so management executed a 10-for-1 stock split effective June 10. The split increased the number of shares in circulation tenfold and organically shrank the price per share by 90%. It hasn't changed the underlying value of the company, but investors can now buy one share of Nvidia for just $123 (as of this writing). Stocks can sometimes get a boost after they split as a broader investor base swoops in to buy, but that alone isn't a good reason to pile into Nvidia. Investors should focus on the company's fundamentals instead, and here are two great reasons to buy the stock. Nvidia CEO Jensen Huang estimates there will be around $1 trillion in spending on data centers over the next five years as operators try to meet demand for computing capacity from AI developers. Nvidia's H100 graphics processing unit (GPU) set the standard for AI chips, and as a result, the company has a market share of more than 90% in the segment. That allows Nvidia to charge a premium for its chips, which is driving incredible growth in its revenue and earnings. In the recent fiscal 2025 Q1 (ended April 28), the company generated a record $22.6 billion in data center revenue alone, which was a 427% increase from the year-ago period. It marked the fourth consecutive quarter of triple-digit percentage growth in the data center segment. Nvidia's Q1 earnings per share soared 461% to $6.12 as the company's gross profit margin continued to climb, reaching 78.9%. Three years ago -- before the AI boom started and gaming was Nvidia's largest segment -- its gross profit margin was around 66%. That highlights just how profitable the company's data center GPUs are, thanks in part to its pricing power. Demand is unlikely to slow in the foreseeable future. While the H100 is still a popular GPU, Nvidia has since released the faster H200. Plus, the company is ramping up production of a new generation of GPUs based on its Blackwell architecture. The GB200, for example, is capable of performing AI inference at five times the speed of the H100. That means developers can build their models much faster, and considering they often pay for computing capacity by the minute, that translates to significant cost savings. Competition is growing, though. Advanced Micro Devices recently started shipping its MI300 data center GPU, which has shown performance advantages over the H100, and it's already attracting many of Nvidia's biggest customers. Although AMD is unlikely to compete with new chips like the GB200 any time soon, any market share it snatches from Nvidia could pressure the latter's coveted pricing power. As I mentioned, Nvidia stock is up 745% since the start of 2023. But it might still be cheap, at least by the widely used price-to-earnings (P/E) ratio, which divides a company's share price by one year's worth of its earnings per share. Investors often use that metric to measure the value of a stock relative to the rest of the market. Nvidia generated $1.80 in earnings per share over the last four quarters (adjusted for the stock split), and based on its stock price of $123.54 at the time of this writing, it trades at a P/E ratio of 68.6. That's more than double the 31.9 P/E ratio of the Nasdaq-100 index, implying Nvidia is extremely expensive relative to its peers in the tech sector. However, investors are willing to pay a premium for Nvidia because its earnings are rapidly catching up to its surging stock price. For example, Wall Street analysts predict Nvidia will generate $2.72 in earnings per share for the fiscal 2025 full year, giving the stock a forward P/E ratio of 45.4. They also forecast $3.74 in earnings during fiscal 2026, translating into a forward P/E ratio of 33. In other words, Nvidia shares don't look very expensive relative to the Nasdaq-100 as long as investors are willing to hold onto them for at least the next two years. Of course, there is a risk Wall Street is overestimating Nvidia's earnings potential, in which case the stock is more expensive than it currently appears. Last year, Goldman Sachs released a report suggesting generative AI could add $7 trillion to the global economy over the coming decade. However, last month, the investment bank issued a new report expressing concerns over the lack of a "killer app," implying companies are struggling to deliver a payoff for all of the money they have spent developing AI so far. Huang's forecast for $1 trillion in data center spending over the next five years could be in jeopardy if Goldman's concerns begin to spread through the tech sector. That would directly impact demand for Nvidia's GPUs and drive a slowdown in the company's growth. But I think there is another reason Nvidia investors should be cautious. Artificial general intelligence (AGI) describes the moment when AI matches human intelligence in most cognitive tasks. Some researchers -- including one who worked for ChatGPT creator OpenAI -- believe AGI could be achieved as soon as 2027 based on the rapid pace of development right now. Developing AI beyond the point of AGI could yield diminishing returns, because the number of commercial workloads that could benefit from such a high degree of machine intelligence is probably very small. If that's the case, demand for Nvidia's GPUs could plummet because the number of developers who want (or can afford) further performance increases will probably shrink. Nvidia operates a fantastic business and it's a clear-cut leader in the market for AI data center chips, but investors who buy the stock today should do so with their eyes wide open to the potential risks, because further blockbuster returns are not a given.

Nvidia Prepares New AI Chip for China, New Price Target Upgrades, and Other Updates Nvidia Stock Investors Should Know About

In today's video, I discuss recent updates impacting Nvidia (NASDAQ: NVDA). Check out the short video to learn more, consider subscribing, and click the special offer link below. *Stock prices used were the after-market prices of July 22, 2024. The video was published on July 22, 2024. The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and Nvidia wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $757,001!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Jose Najarro has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy. Jose Najarro is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through their link they will earn some extra money that supports their channel. Their opinions remain their own and are unaffected by The Motley Fool. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.