What Happened:
Shares of leading designer of graphics chips Nvidia (NASDAQ:NVDA) fell 5.7% in the morning session after equities pulled back, with market participants likely taking profits ahead of a big earnings week. Tech stocks led the decline, with the Nasdaq index down 1% while the SP 500 fell 0.5%. Some of the notable stocks reporting earnings during the week include Walmart (NYSE:WMT), Booking Holdings (NASDAQ:BKNG), and Nvidia (NASDAQ:NVDA).
Stocks have had a good run since the fourth quarter of 2023 as markets expect the Fed to begin cutting rates as early as the first half of 2024 amidst cooling inflation data. The market's momentum continued into the early weeks of 2024 following solid earnings results from big tech names, including Meta (NASDAQ:META), Amazon (NASDAQ:AMZN), and Microsoft (NASDAQ:MSFT).
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Nvidia? Access our full analysis report here, it's free.
What is the market telling us:
Nvidia's shares are very volatile and over the last year have had 8 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 15 days ago, when the company gained 5.1% on the news that Goldman Sachs analyst Toshiya Hari raised the price target on the company's stock from $625 to $800, and maintained a Buy rating. The price target represented a potential 16% upside from where shares traded when the update was announced. The analyst added "We believe Nvidia will remain as the industry gold standard for the foreseeable future, given its robust hardware and software offerings and, importantly, the pace at which it continues to innovate."
Nvidia is up 42.1% since the beginning of the year, and at $685.87 per share it is trading close to its 52-week high of $739 from February 2024. Investors who bought $1,000 worth of Nvidia's shares 5 years ago would now be looking at an investment worth $17,263.
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