Investors who snapped up shares of Nvidia Corp. at the bottom of last month’s swoon got a harsh reminder of the multiple forces pushing and pulling on the chipmaker’s business prospects.
What looked like a prescient bet in mid-September — the stock surged 14% over 15 trading days — turned sour this week as shares tumbled 8.5% in the worst two-day decline in more than a year. The rout was triggered by new US rules aimed at restricting cutting-edge technology from China, a move that threatens a chunk of the one-fifth of Nvidia’s revenue that came from that country last quarter.
It was another harsh reminder for Nvidia fans that for all the hype around its position as a primary beneficiary of the artificial-intelligence gold rush, the company’s more immediate prospects are at the mercy of the geopolitical struggle over the chips that power virtually every aspect of the modern world. It’s also not immune to rising interest rates and the economic concerns weighing on markets.
“It’s certainly at a vulnerable point,” said Alec Young, chief investment strategist at Mapsignals. “But you could’ve said that the last two times that it went down here after that big upside move.”
Nvidia vaulted to the top of performance charts in May after it gave a sales forecast that shattered analyst expectations and solidified the chipmaker as a main beneficiary of the AI trend. The stock’s record surge put Nvidia’s market capitalization in reach of $1 trillion, a level it surpassed in June. At its next earnings release in August, another blowout report catapulted shares to an all-time high.