A week ago, I saw Nvidia (NASDAQ:NVDA) priced at over $800/share and suggested traders take profits.
Since then, NVDA stock is down nearly $100/share. (Don’t know my own strength.) It’s due to fall further on July 19. This means there’s a new question. When do you get back in?
Nvidia shares fell for two reasons. First, China burned the Bitcoin market, meaning a lot of high-end graphics cards are hitting the secondary market. Second, rival Intel (NASDAQ:INTC) launched a $30 billion bid for Global Foundries, the Arab-backed chip-making foundry.
Neither move changes Nvidia’s fundamentals. Those older boards will be quickly absorbed by gamers, who have been waiting for this opportunity. The global chip shortage is far from over. Intel isn’t even Nvidia’s foundry. That would be Taiwan Semiconductor (NYSE:TSM), which I also wrote about recently.
Taiwan Dominance
Despite its saber rattling, China is not about to invade Taiwan.
That’s because calling Taiwan the Saudi Arabia of semiconductors is to dramatically understate the case. More than half the world’s high-end microprocessors are made in Taiwan. TSMC, as it’s known, isn’t sharing the technology that let it extend Moore’s Law to its logical conclusion, circuits closer together than strands of DNA. China has tried to steal it, hiring TSMC engineers, but it has been unsuccessful. Intel hasn’t cracked it either. TSMC’s new factory in Arizona will use it, but that factory will just supply a tiny portion of demand, for big customers like Apple (NASDAQ:AAPL).
On top of that, Nvidia and AMD (NYSE:AMD), which dominate the design market, both have CEOs born in the same small Taiwanese city of Tainan. The family of Nvidia CEO Jensen Huang moved to Oregon when he was a child. (AMD CEO Lisa Su’s family moved to New York when she was 3.) Immigrants, they get the job done.
Nvidia made its mark processing graphics for video game consoles and has moved into processing for data centers. (Bitcoin was always a sideline.) The long-term plan is to complete the purchase of England’s ARM Holdings, now controlled by Softbank (OTCMKTS:SFTBY) and dominate in microprocessors. As Cloud Czars like Apple move to order their own chips, they’re licensing basic designs from ARM. The microprocessor market, worth $100 billion in 2020, is projected to be worth nearly $160 billion by 2025. There seems nothing that can keep Nvidia from dominating it.
Global Threats for NVDA Stock
Of course, as I noted last week, Nvidia is a very pricey stock. Even with its recent fall it had a market cap of about $740 billion, on estimated 2021 sales of under $20 billion. It could go down further and still be expensive.
Analysts at Tipranks are still flogging Nvidia, and those surveyed by Yahoo have only lately begun urging caution. The stock is due to split 4:1 on July 19, so if you look at the stock charts tomorrow don’t panic.
The Bottom Line on NVDA Stock
Since I’m the one who called the turn down, I should probably be the one to call the turn back up.
My guess is that the new post-split Nvidia bounces off $175 ($700 pre-split) but you don’t have to rush back in. (It was up slightly on July 19.)
I also own Intel shares, and I like their new CEO, Pat Geisinger. His moves are no threat to Nvidia. Support from the Biden Administration, desperate to on-shore the industry, means he should be able to squeeze profits from the foundry.
China also remains desperate to get TSMC’s tech but knowing what and knowing how are different. If global trustbusters stop Nvidia’s purchase of ARM that could also take the stock down, and China must approve the deal.
You don’t have to rush into Nvidia, in other words, but it’s one of those stocks you really should own. Find a price you’re comfortable with, then start accumulating it.
On the date of publication, Dana Blankenhorn held LONG positions in NVDA, INTC, TSM and AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.
