Connect with us


Why Nvidia shares plummeted 10% today




Why Nvidia shares plummeted 10% today

It’s rare for a $2 trillion stock to fall in the absence of immediate news, but that’s exactly what happened Nvidia (NASDAQ: NVDA) Today.

The AI ​​chip leader’s shares were caught up in a broader AI sell-off after an analyst spotted it Super microcomputer (NASDAQ: SMCI)another AI stock leader, has not reported preliminary earningswhich casts doubt on the coming results.

That news sent Nvidia down 10%, while Supermicro lost 23.1% today.

A stock chart falling with a red background.A stock chart falling with a red background.

Image source: Getty Images.

The AI ​​momentum is shifting

Until this month, AI stocks had skyrocketed this year on the back of tremendous growth and excitement about the groundbreaking technology. At one point, Nvidia shares had nearly doubled so far this year, following another blockbuster earnings report in February, and its market capitalization was $2 trillion.

However, as this week’s sell-off indicates, much of these gains were driven primarily by sentiment and the fear of missing out (FOMO) of the AI ​​boom.

When stocks have already made hundreds of percent gains, like Nvidia and Supermicro, it doesn’t take much for those gains to settle back down, and that seems to be happening here.

A negative news story triggers a small amount of selling, leading to a flood as investors rush to lock in profits before a potential bubble bursts.

Is Nvidia stock in trouble?

The observation that drove the sell-off could easily be a non-event, as a Wells Fargo The analyst noted that Supermicro did not provide its usual preliminary revenue report, possibly implying that quarterly results were weaker than expected.

That’s purely speculation, but investors should also be aware that such an event would not normally cause a stock to plummet 23% as Supermicro did, but the stock has been highly volatile and is partly supported through momentum and sentiment.

As far as Nvidia is concerned, the GPU maker is a close partner of Supermicro, but Nvidia is much larger, meaning it isn’t particularly sensitive to Supermicro’s results.

Still, sentiment in the AI ​​sector tends to move these stocks in unison, and Nvidia has also benefited from the enthusiasm and high expectations for AI, so it’s not surprising to see the shares fall in line with Supermicro .

It’s too early to know if today’s sell-off is meaningful. Keep an eye on Supermicro’s third-quarter earnings report due after hours on April 30 as that will confirm or reverse today’s sell-off. Expect Nvidia to team up with Super Micro Computer after that news comes out.

Should You Invest $1,000 in Nvidia Now?

Consider the following before buying shares in Nvidia:

The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.

Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $518,784!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.

View the 10 stocks »

*Stock Advisor returns April 15, 2024

Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Jeremy Bowman has positions in Wells Fargo. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool has one disclosure policy.

Why Nvidia shares plummeted 10% today was originally published by The Motley Fool