Further market downturn led to Nvidia shares dropping today.
NVIDIA (NVDA -6.67%) The rollercoaster week continued on Thursday as stocks fell amid a broad sell-off in technology stocks. The sell-off came following weak economic data this morning and the Federal Reserve’s decision yesterday to hold off on cutting interest rates.
Additionally, closely-affiliated Arm Holdings fell sharply after reporting earnings last night.
As of 1:28 p.m. ET, Nvidia shares were down 7% after rising 13% on Wednesday and dropping another 7% on Tuesday. At the same time, Arm shares were down 16.9%.
Image source: Getty Images.
Nvidia fails again
Nvidia and its semiconductor-related stocks largely fell throughout July in what appeared to be a rotation from large tech stocks that have surged this year to struggling smaller stocks.
Investors took a breather from the selling pressure yesterday as Nvidia shares surged on AMD’s strong results, but the selling pressure has increased again today.
No company-specific news was announced for Nvidia, but the ISM manufacturing survey was at its lowest since November and initial jobless claims rose to the highest level in a year, signaling a continued slowdown in the labor market.
These numbers, combined with yesterday’s decision by the Fed to keep interest rates steady, have some worried the company’s fortunes could quickly deteriorate. A recession remains a risk, and one that could be devastating for an already shaky industry, the semiconductor industry, and especially for a fast-growing company like Nvidia.
Additionally, Arm shares have been selling off even as the company beat expectations, potentially fueling the argument that AI stocks are overvalued.
Will Nvidia’s stock price continue to fall?
While Nvidia shares did start the day in positive territory, a change in investor sentiment due to weak data appears to be the main reason for today’s decline.
Stock volatility could continue into tomorrow, when the July jobs report is released and the market is likely to swing either way. Don’t be surprised if Nvidia shares rise a few percent again on Friday.
The AI chip leader will have a chance to bounce back when it reports its second-quarter earnings later this month. The company’s shares may continue to fall ahead of the earnings release, but much of the recent sell-off appears to be related to valuation concerns and a broader rotation into smaller caps in preparation for a low-interest rate environment.
Based on recent comments from major tech companies and the performance of companies like AMD and Arm, demand for AI hardware remains very strong, although investor sentiment and economic data will likely determine Nvidia’s price movement until second-quarter earnings are released.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.
