As the Nvidia share price nosedives again, should I be worried?
On the 3rd of September, the stock price of Nvidia (ticker symbol: NVDA) dropped by 9%.
Typically, I don't really focus on short-term fluctuations in stock prices. Even though I do have some investment in the company through an artificial intelligence fund, I understand that prices can go up and down on a daily basis. I'm more concerned with the overall long-term trend.
However, I am feeling apprehensive about Nvidia's dominance in the market.
There was a belief that when the United States faces economic problems, the impact is felt worldwide. In simpler terms, any struggles in the US economy will have a ripple effect globally.
It appears that when the company that makes computer chips has a fluctuating stock price, it causes the overall stock market to decrease in value. This has an impact on everyone, including myself.
Building Success Through Progress
However, despite my frustration, I can understand where Nvidia's shareholders are coming from. They must feel like life is being very unjust to them.
On the Wednesday before last (August 28th), the stock price of the company dropped by 6% after the trading hours, when the results for the three-month period ending on July 28th, 2024 were revealed.
Considering how the market responded, one would have assumed it was negative information.
No, it actually exceeded expectations quite impressively once again.
In the last three months, it made $30 billion in revenue, surpassing the predictions of analysts who expected $28.7 billion. Additionally, its earnings per share were 68 cents, which is 3 cents more than what was anticipated.
No one could fully understand how investors reacted. In the end, many reporters agreed that while the results were positive, they didn't exceed the most optimistic predictions.
Can we truly believe that $175 billion was taken away from its value just because one analyst was more positive than the rest? I think the reality is that many investors wanted to cash in on some gains.
Leading up to the announcement, the company's stock had risen by 160% since the start of 2024. Earnings reports are typically a moment for investors to assess their investments and determine if they should hold onto or trade their stocks.
However, even with all the recent chaos, it's important to remember that the stock price has actually increased by 7% over the past month.
And its present market capitalization exceeds the total value of all companies in the FTSE 100 index combined.
Not In My Hands
I can't control the focus on Nvidia's stock price, but I know from experience that the obsession will fade and people will start paying attention to other things eventually.
The large American company's expansion will definitely decrease as markets reach maximum capacity and rivals begin to establish themselves. It is uncertain if the company will be able to invent fresh, original ideas. For instance, there are concerns about the success of its latest Blackwell chip compared to its previous versions.
However, let me clarify that I believe it is a fantastic company that will maintain its success in the long run, although progress may be slower.
I believe it will be successful because it creates the computer parts that artificial intelligence businesses use. While there is some doubt about which companies will profit the most from the software aspect, all of these programs will need semiconductors to operate.
