It is improbable that AMD will come across this point so soon as it has been hit by NVIDIA’s rising stock prices for more than a few months now. Understandably, investments in such companies are rather shaky and prone to reversals, especially taking into account the current state of affairs in the world’s largest economy.After huge growth accompanied by the madness of the AI, NVIDIA recently after the announcement of its Q3 results, fell in its stock Last week. So what’s the story? Is this stock worth getting cornered when it is being marketed as the next best thing, or are we simply witnessing a case of sell-off in the history of a particular stock?
In this piece of writing, we will consider factors such as NVIDIA in recent times by geographic region, China-Taiwan conflict and its implications, U.S elections in the near future and I should ask is buy the dips in style a good idea. So take your coffee and let us move on to the next section let us hope that none of it overflows the key board.
NVIDIA’s Dominance: The Tech Powerhouse in the AI Revolution.
To begin with let’s begin with the core of the company – what is it that drives NVIDIA?
The marketing of the brand has always been in line with artificial intelligence and its GPUs remain the key component for most of the developments in AI, mostly those used today. Some can be tempted to call NVIDIA a Swiss army knife and for good reason: it is useful, it is important, and it always has or looks for ways to use it too.
In the second quarter of this year, NVIDIA reported earnings that even the most weathered prey would have had reason to fray an eyebrow at. They announced $13.51 billion in revenue, representing an impressive 101% increase compared to the previous year. It is as if they were not overseas at a developmental game; rather they were launching deep fly balls. CEO Jensen Huang was almost to bungee jumping with a blanket on in excitement and stating; ‘There is a large demand in all segments’. It can be pointed that were CUDA the baseball team it would be the Yankees, every one is out for CUDA but not everyone can bear the expense of a CUDA event.
What is Driving the Success of NVIDIA?
So what is driving the success of NVIDIA? It is a blend of factors such as listening to opportunities that present themselves, technology and of course some fortune. The developments of the digital transformation were sped up to unprecedented levels due to the pandemic, and organizations are now in a hurry to use AI to remain in the game. And it’s the same from NVIDIA investors perspective. “Now its time to capitalize on the excitement”.
AI Dominance: Fueled by cutting-edge technologies such as AI, NVIDIA has been actively involved in the action. Chariot or Lerning Machine, their chips are ushering in tomorrow.
Gaming Growth: Let’s not avoid the creepy elephant in the room. Just like that, many of us went from being dormant to hanging on our couches for long hours – gaming. It turns out that pain hasn’t gone away and NVIDIA’s GPUS have been inflating in their sales, thanks to gamers who seek to enhance their afford. If you have ever had the opportunity to watch a gamer stream on Twitch, you know those intricate graphics cannot be created on their own!
Data Sorting Centers: With more businesses opting for cloud services, so important, are the data centers that continue to grow in searching and satisfying the processing of necessary information. What’s what NVIDIA does, enabling those data centres to run smoothly.
But just when you thought NVIDIA was on easy street, reality threw a curveball.
Q3 Report: A Check-Up, Not Scary Yet
The quarterly earnings came off a high of Q2 earnings so with mixed reactions people expected the report of the third quarter. Revenues reaching $18.12 billion was more than 100% on year over year basis for the same quarter of year but still stock had a crash afterwards. The question is; Why? It appears investors can be compared to a scared cat: just let them see one wrong step and vrienden off the move!
Why the drop?
The stock price slide of about five % that is after the earnings call was because of one major reason; profit taking. When a stock prices hike as much as NVDIA, making billions in a short period, there is always the risk of regret among the stock holders. They cash their stakes and take in profits. Why not victory dance if you are sitting on decent income?
But here comes the twist; The guidance given by NVDIA was too high. It really was easy to make future projections as those made by the company were optimistic. They foresaw growth, but also risked a future drop in some targets. The investors who have a very big appetite for good news perceived the good news and headed for mountains.
Should You be Concerned?
Let me be direct here: There is no cause for alarm! It is advisable to buy the stock at dips in a company such as NVIDIA. The long-term performance of NVIDIA continues to be optimistic, and there are occasions when short-term downturns may offer new chances. If you ever attempted to catch a falling knife, I’m sure you understand that it is somewhat difficult. But if you manage to catch it correctly, such dips can yield good profits.
Why Purchase During A Market Pullback?
As an investor, buying the dip is a big plus especially with the likes of NVIDIA Corporation. Here’s why:
Long-term story: NVIDIA is not and will never be a one-hit-wonder. There are a lot of products in the pipeline and a lot of innovations headed towards the AI industry and the growing gaming industry.
Valuation Compression: Stocks lag sometimes and when they do, their underlying valuations tend to be better. If you trust in the fundamentals of the stock, then buying the needless dip is right to offer a cheaper entry.
Sentiment: Let’s not forget about sentiment – it can be wrong, plain wrong. What looks like a panicking situation today could be regarded as an opportunity tomorrow.
Pillars of Nvidia in Brief Strategically, therefore, irrespective of the reversal in revenue growth, I consider this a perfect opportunity to amass shares somewhere ahead of the next milestone. It’s like a favorite pair of sneakers being on sale—now tell me, who would not wish to take a good deal? H. Geopolitical Risks: China, Taiwan, and the Semiconductor Supply Chain But wait! Because as if the stock market wasn't hard enough let's add a pinch of geopolitics people! The other side of Taiwan, lie and think, has severe consequences for NVIDIA and the technology world as a whole. The Taiwan Connection For chip manufacturing, NVIDIA is dependent upon TSMC (Taiwan semiconductor manufacturing company). TSMC is the biggest, best, and most technically sophisticated chip maker onto the planet. Lacking TSMC would result in Nvidia being unable to manufacture many, if not all, of its gpus. Hence whenever you hear about the rising temperatures in the Taiwan Strait you imagine the sounds of car revving, and hence your heart beats faster and you are preparing for trouble.
Will China Launch an Assault on Taiwan?
Now let us tackle the big question, will China launch a military operation against Taiwan?
On one hand full scale invasion appears improbable, such a prospect would provoke a backlash military response from the U.S. and possibly push the entire globe erratic. I mean, who wants to be ‘that’ guy at the party, the one who gets everyone fighting?
On the other hand, there is always an opportunity for subversive actions, like bombing micro chips or blockade that may interfere with the flow of econometric materials. If China does decide to use force, the constricted off Nvidia will feel the pinch within no time.
The Global Semiconductor Supply Chain Is a ‘House Of Cards’
The global semiconductor supply chain is complicated, yet equally simple, and so is akin to a house of cards, one wrong twist of events manufactured or sourced from Taiwan will only be able to draw so many industries and displace so many.
The semiconductor famine of the recent pandemic shined light on how fragile the tech supply chain really is. Disruptions in Taiwan could rattle the entire industry and break NVIDIA stock.
Addressing Risks
But no fears! NVIDIA and companies like it are trying to have less dependency on a single supply chain source and trying to find alternatives. They’re looking for new ways to manufacture chips and for potential customers in the other manufacturers of chips.
In the meantime, it’s important to keep an ear to the ground with respect to political issues. For example, keeping track of the media reports can help you assess how these frictions might affect the stock price of NVIDIA. But, let’s be realistic and not be excessive with the emotions, this is not a soap opera here!
The US Presidential Election: A Game Changer For NVIDIA
As if warring against these geopolitical fires was enough, we now have to consider the fact that there is another one to add to our belt of factors: the US presidential elections. Wholesale central policies of China and of its interactions with technology, for example, may be very different depending on the victor of the election.
Pro Business President
In the event that such a pro-business candidate comes into office, we may witness a more soft stance on China. Relations may improve and the climate may cool down which would be better for businesses such as NVIDIA. Should such controls be dropped, NVIDIA may see several advances, particularly in the Asian region.
In this scenario, it is possible that NVIDIA’s share price remains on the upwards trend. This is because the company is in a very strategic position to take advantage of the increased demand for AI and gaming technologies. Think of it this way: NVIDIA shares are going up higher than a drone shot at a technology conference where all other competitors have perished.
Representation of a Hard Fist President
In contrast, if a hardliner does come to power, China and the US relations may get further out of control than they currently are. In which case there may be new tariffs, sanctions or other restrictions on trade that may adversely affect NVIDIA’s earnings. If there are restrictions on technology trade with China, NVIDIA will live to regret it since the company is a technology giant in that region.
Volatility: Wait For It
Let’s be realistic: No one ever said anything about election years being boring! As with the rest of the stocks, expect quite a lot of movement in NVIDIA stocks as shareholders try to interpret the political developments. But here is the silver lining; many times volatility presents buying opportunities. If you can take such risks and hold on to NVIDIA for a long time, chances are that you will one day enjoy the sweet fruit that you have been enduring so much pain for.
As a trader, I always say, “If I’m kept calm in the storm, when others are going crazy, than I’m probably doing something right.”
I haven’t lost height as a stock since post mid 2012 but, this question needs to be asked nevertheless: how high can NVIDIA’s stock really go?
Although the stock has plunged recently, there is still some expectations of the company by investors. Some analysts put price targets around the range of $800 and even $1000 in the years to come. Reasonable? Or a bit too much? This sounds all like a lapse in rationality. This is a disillusionment that is not absolutely founded on fantasy though:
The Bull Case: there Is No Ceiling
If all these conditions are met: no Taiwan war, tendency of AI development is retained and if the country is run by a capitalist compassion for business, nvidia may as well keep ascending. There is very little question regarding the increase in demand with respect to AI based technology. And NVIDIA is amply equipped to benefit from this chalet trend.
Factors that will lead to Growth
Here are some notable growth factors, which can take NVIDIA’s stock to the next level:
AI Phenomenon: AI is not a trend; it’s changing the whole scope exactly as organic capitalism had predicted. NVIDIA is one of the pioneers in providing both the hardware and software needed for the advancement. The tech company is not about to disappear soon!
Gaming Boom: There is a growing market for gaming and more so NVIDIA’s graphics processing units (GPUs) processors are very popular. Because of the growth of virtual reality, including the e-sports(electronic sports), the prospects are quiet good for NVIDIA company.
Diversification: In tandem with expansion, NVIDIA will extend into additional industries and markets hence availability of other revenue sources making it less beholden to any one industry.
The Bear Case: Geopolitical and Election Risks Loom
But let’s not ignore the flip side. If disputes in the world worsen or the us decides on a more aggressive stance, NVIDIA will have problems. A disruption any part of the Taiwan Strait could bring the operation to a standstill, and tougher American legislation on the export of military equipment will curb the revenue.
Market Sentimenet: The Wild Card
Market sentiment can also be that wild card. For instance, there is a general decrease in the stock market or recession whereby the recession may peg the price of NVIDIA stock regardless of actually how the stocks themselves of the company wand. Should hysteria spread to investors, they could abandon strategy growth stocks, and NVIDIA would be one of the victims.
But don’t forget: when the market turns volatile, there is usually a chance to buy and those with nerves of steel can make the most of it. Instead of panic selling, consider it to be a clearance sale on all tech stocks!
Conclusion: Is NVIDIA a good investment decision now?
So then, after those events, what is the conclusion? Even after the stock price has taken its recent dip, is it a still NVIDIA a stock more reasonable to retain?
As the saying goes, why not? If you are optimistic about AI and believe that there’s no way the state of international relations would affect NVIDIA’s operations, then this dip could be pretty good. As for NVIDIA, the fundamentals of the company’s growth vision and perspectives remain unchanged, and the company is constantly evolving.
But watch the headwinds—they are political developments globally, the coming U.S. elections, and the implications all these may have on supply chains. Opportunistic as always, the market is volatile which means there are places of opportunity and for those who can withstand it all, NVIDIA is a company that is worth investing in.
NVIDIA’s optimism is unquestionable in the end. In case, you are able to get through the chaos of the coming weeks and months and focus on the long-term instead, you may just find yourself with a wonderful investment. And do note, when it comes to trading, it helps to be patient—much like not eating the last piece of chocolate cake in the party but waiting for the right moment.
So put on your trading cap, keep one ear to the ground, and let’s wait and see how the this tornado of a journey unfolds. Who knows? Perhaps the following leg of NVIDIA's travel is merely a few steps away.
