Nvidia Stock Tumbles: Analyzing the Dip and Its Implications

Nvidia Stock Falls Again. Should You Buy the Dip? | The Motley Fool

Nvidia (NVDA -3.71%) was among the tech stocks plunging today after the Bureau of Labor Statistics reported cooler-than-expected job growth in August. Just 142,000 jobs were added last month, below expectations at 161,000, and readings from June and July were revised downward as well. The news led investors to believe that the economy was weakening faster than expected, which could be particularly damaging for growth and tech stocks like Nvidia that are relying on billions in infrastructure spending to advance new generative artificial intelligence (AI) technologies. As a result, tech stocks were down broadly with the Nasdaq Composite down 2.3% as of 1:19 p.m. ET, and Nvidia was off 4% at the same time after falling as much as 5.8% earlier in the session. The iShares Semiconductor ETF was down 4% as well, showing the chip sector was broadly impacted. It's been a rough week for the AI chip leader. The stock plunged on Tuesday, seemingly because of rumors that the Justice Department had issued it a subpoena related to an antitrust investigation, though Nvidia later said that wasn't true. Still, today's pullback shows that the stock is sensitive to the broader macro environment. Investors apparently believe that a recession or an economic slowdown could slam the brakes on the AI boom as it would deter big tech companies and start-ups from investing in the new technology. That would be a problem for Nvidia as its business and its lofty valuation is based on soaring demand for its data center GPU components, which are highly valued for their ability to run complex AI models. The jobs report is just one data point of many, and while there are other signs that the economy is weakening, it doesn't look like a recession is around the corner -- the unemployment rate is still low at 4.2%. Additionally, the Federal Reserve is expected to cut interest rates later this month, which should give a boost to Nvidia and the broader economy. The stock did fall after its earnings report last week, but its overall numbers were strong. The business continues to grow exceptionally fast, and it expects to ramp up production of its new Blackwell platform, which is already seeing strong demand, in Q4. Finally, Nvidia's biggest customers, like Microsoft, Alphabet, and Meta Platforms, are unlikely to be fazed by a hiccup in the economy as these companies are sitting on tens of billions of dollars in cash and have all declared that investing in AI infrastructure is a top priority. It would likely take a significant economic crash to derail their investment plans, meaning Nvidia is more protected from economic volatility than it may seem. That's a good reason to bet on the stock recovering from today's slide.

Why Nvidia Stock Is Plummeting Again Today | The Motley Fool

Nvidia stock is losing ground in conjunction with an underwhelming jobs published by the U.S. Labor Department today. Recent news about an investigation into the company by the Department of Justice (DoJ) on antitrust grounds is also playing a role in the pullback. Starting in 2022, the Federal Reserve began an aggressive campaign of interest rate increases designed to combat roaring inflation. The U.S. central banking authority had sought to engineer an economic soft landing that would slow currency devaluation while also avoiding a recession. While the Fed is widely expected to finally deliver an interest rate cut later this month, investors have recently become more skeptical about the likelihood of the soft-landing scenario being achieved. The jobs report published by the Labor Department today have provided the latest bit of bad news on that front, and Nvidia and other growth stocks are getting hit particularly hard. According to the data, the U.S. added 142,000 jobs in August -- falling short of the average Wall Street target's call for 160,000 new job additions. The size of the miss is particularly notable because analysts and economists had already started to revise targets downward in light of other economic indicators. For example, investors received news earlier in the week that U.S. manufacturing production had declined again last month. So even though the long-awaited pivot to rate cuts now appears to be imminent, investors may not be getting the bullish macroeconomic backdrop they had hoped for. On Tuesday, Bloomberg published a report stating that Nvidia had received a subpoena from the Justice Department as part of an antitrust investigation. The media outlet first reported on the probe in June, and its subpoena report raised concerns that the investigation was escalating and prompted sell-offs of the artificial intelligence (AI) leader's stock. Nvidia responded publicly to Bloomberg's report yesterday and stated that it had not been subpoenaed by the DoJ, which helped spur a rebound for the stock, but the possibility of a looming antitrust suit was thrust back into the spotlight. In a report published today, Business Insider detailed a letter written by Senator Elizabeth Warren voicing support for an antitrust investigation into Nvidia. Warren raised concerns that the company has become too influential in the AI space and stated that its dominant market position posed "dire economic risks." Nvidia's advanced graphics processing units (GPUs) have become the foundational hardware for AI training and other applications, and the company has a commanding lead in the product category. But while the company dominates the advanced GPU market, it's not clear that the DoJ would win an antitrust suit against the company even if it decided to pursue such action. For risk-tolerant investors willing to embrace volatility, recent pullbacks for Nvidia stock could be a worthwhile buying opportunity.