The past few weeks have been quite difficult for the technology giant Nvidia, as its stock has decreased in many trading sessions, with some days witnessing significant falls. Nonetheless, despite this, investing in the tech company might still be a smart investment for those with an eye on the future.
Historically, we have witnessed Nvidia navigate through turbulent times with remarkable resilience and innovation. For example, in 2022, Nvidia faced a significant downturn as demand from the gaming and cryptocurrency sectors plummeted. This led to a massive sell-off, and many investors exited, causing a steep decline in stock value. However, those who held their ground were rewarded, as by early 2023, Nvidia’s stock rebounded spectacularly, surging by nearly 750%.
The impressive rebound happened because Nvidia did not just sit back and relax, but instead, the tech giant kept innovating. This dedication has positioned Nvidia as the leader in supplying chips for the Artificial Intelligence (AI), and as this technology has become more prominent, Nvidia’s sales to data centers exploded. In fact, the excitement surrounding Nvidia has been so noticeable that even smaller companies are still waiting to get their hands on Nvidia’s current chips. In addition, the tech giant is working on the Blackwell graphics processing units (GPUs), which are expected to be a major hit.
Moreover, it is worth highlighting that although Nvidia has been dealing with the restriction on selling advanced chips to China, the company is working on a new chip that complies with current trade regulations, and if this turns to be successful, it could eventually boost Nvidia’s sales and stock price.
As for the current year, despite some slight bumps along the way, Nvidia’s performance has remained robust, with its stock reaching a peak of $135.58 on June 18. However, considering that as with any stock that experiences such rapid growth, a correction was inevitable, Nvidia’s value could not continue increasing indefinitely. As of July 30, Nvidia’s stock closed at around 24% lower than its June high.
When we talk about a correction, we are referring to a natural decline in a stock’s price after it has risen too quickly. This usually happens when a stock becomes overvalued, meaning its price has climbed higher than what the company’s actual performance and growth can justify.
Essentially, the rapid rise is driven more by investor optimism and speculation rather than by the company’s fundamentals, and this situation can create selling pressure on the stock. For instance, investors who bought early might decide to sell their shares to lock in their profits, while others may sell out of concern that a “bubble” could burst if the company’s earnings fail to meet high expectations. This selling pressure can contribute to the stock price falling as the market begins correcting itself to reflect a more accurate value.
For now, we cannot be certain if Nvidia’s earnings for the second quarter will meet or fall short of expectations. We will need to wait until August 28, when the company is scheduled to release its next financial report, to get a clearer picture of its performance.
But if we focus only on long-term, then there is a big chance that Nvidia’s stock could very well rise in value over time. Thus, while we await for its upward trend to return, the recent dip, driven by selling pressure, might actually be a golden opportunity to snap up shares at a lower price.
