Why Nvidia (NVDA) Shares Are Falling Today

What Happened:

Shares of leading designer of graphics chips Nvidia (NASDAQ:NVDA) fell 8% in the afternoon session after the major indices fell with the Nasdaq down 1.2% while the S&P fell 0.6%. Investors are likely taking profits in megacap tech companies ahead of a big earnings week. Some of the big tech companies reporting earnings later in the week include Meta, Apple, Microsoft, and Amazon. 

Also, investors may be positioning ahead of the Federal Open Market Committee meeting on July 31, 2024, for an update on the pace of rate cuts expected in the near term. The consensus estimate is for the Committee to start cutting rates as early as September 2024.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Nvidia? Access our full analysis report here, it's free.

What is the market telling us:

Nvidia's shares are very volatile and over the last year have had 16 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The previous big move we wrote about was 6 days ago, when the company dropped 5.6% as major indices declined, with the Nasdaq down 3%, while the S&P 500 fell by 1.7% following weaker-than-expected earnings from Alphabet (YouTube Advertising revenue missed estimates) and Tesla (7% drop in auto revenue). Tech giants, including Microsoft, Alphabet, Meta, and Apple, have shed some of their year-to-date gains as a new market narrative—in favor of small-caps stocks—gains some momentum following the growing conviction that the Fed will start to cut rates in the second half of the year. The sentiment also benefitted from improved inflation prints last month, as the headline numbers edged closer to the Fed's 2% target. Overall, the shift suggests investors are finding more reasons to hold positions in risk assets, especially small caps that tend to be more volatile.

Nvidia is up 120% since the beginning of the year, but at $106.10 per share it is still trading 21.7% below its 52-week high of $135.58 from June 2024. Investors who bought $1,000 worth of Nvidia's shares 5 years ago would now be looking at an investment worth $24,130.

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