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Nvidia (NASDAQ:NVDA) has been in the news a lot over the past month. Clearly, the quarterly earnings release was a key focus, but other news relating to new deals and competitor actions also impacted the stock price. If an investor had decided to put £1k in the US stock in the lead up to all of this, here’s what it would currently be valued at.
Talking through the numbers
I’m going to assume the investor bought a month ago, when the share price was trading at $180.77. It’s currently at $167, representing a 7.6% fall over this period. The £1k investment would now be worth £924.
Before I start to make judgments based on this, it’s key to compare this to the broader market and to similar companies over the same time period. The best benchmark for Nvidiais the Nasdaq index. Over a one-month period, the index is up 1.1%.
Next, I looked at other large tech companies. For comparison, Apple is up 9%, Amazon is up 4%, and Microsoft is down 5%. Therefore, it’s clear the past month has been a mixed bag when it comes to tech stock performance. This isn’t too surprising, given that earnings season has been positive for some and negative for others. But it does highlight that Nvidia is the worst performer among the others that I’ve considered.
Why the stock has fallen
When we just look at the earnings report, the numbers don’t flash any immediate red flags. Q2 revenue rose 56% versus the same period last year to hit $46.7bn, with AI data centre revenue around $41.1bn.
However, there was some concern that the pace of growth going forward isn’t as high as people expected. Some would say the benchmark for growth is set too high, meaning the stock was always going to fall. Notably, there were no H20 chip sales to China included in the forecast, reflecting ongoing geopolitical constraints.
Another hit came as Broadcom secured a $10bn AI chip deal, raising concerns about the erosion of Nvidia’s pricing power and potential lost revenue. An article I read flagged up to $12bn in potential lost revenues for Nvidia, even as AI demand remains strong overall.
The long-term vision
It can be dangerous to look at performance over a one-month period and jump to hasty conclusions. The fact is that Nvidia stock is up 62% over the last year. The growth prospects are still high. For example, we had news last week of a $1.5bn GPU leasing deal with AI cloud startup Lambda, involving leasing back 18,000 of its own AI chips over four years. Deals like this show the scale of potential business that still exists.
With AI adoption and innovation rapidly increasing, I think Nvidia is still at the top of the tree going forward. I’ve already got enough exposure to this sector in my portfolio right now. But for investors who are looking to tap into AI as a theme, I feel it’s a stock to consider buying.
