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Nvidia Stock’s Decline Is a Brief Window of Opportunity

California-based graphics-chip maker Nvidia (NASDAQ:NVDA) stock is a well-known name to video-game players and developers. At the same time, NVDA stock is famous on Wall Street for providing outstanding returns over the long run.

the Nvidia (NVDA) logo on a call phone being held in someone's hand.
Source: NPS_87 / Shutterstock.com

As we’ll see, Nvidia’s loyal shareholders have enjoyed powerful gains. On the other hand, no stock is meant to just go up forever without taking breaks from time to time.

As NVDA stock takes a breather and pulls back, some folks will unfortunately get shaken out of the trade. A more level-headed response would be to assess Nvidia as a company, and to determine what might have turned Wall Street against it.

Upon closer examination, it appears that investors don’t generally have a problem with Nvidia as a business enterprise. Rather, there’s a macro-level issue at play, for which Nvidia can’t be faulted.

NVDA Stock at a Glance

Would you believe that NVDA stock went from $50 per share in March of 2020, to $346.47 in November of last year? Even with a rock-solid name like Nvidia, that’s still very impressive.

It’s entirely possible that the onset of the Covid-19 pandemic was a tailwind for Nvidia during that time. The need for graphics processing units (GPUs) was intense as people turned to video games for distraction and entertainment during the crisis.

Admittedly, Nvidia doesn’t pay much of a dividend. However, that’s more than made up for by the astounding share-price appreciation of NVDA stock.

Yet, all rallies much come to an end, at least temporarily. In December 2021 and the first half of January 2022, the Nvidia share price pulled back to the $260 area.

The bears will show their teeth during times like this, but don’t be afraid. They’ll go back into hibernation soon enough.

Not Just Supply-Chain Woes

We’ll check on Nvidia’s financials in a moment, and they’ll show that the company is doing extremely well. With that, the bears will be hard-pressed to argue that Nvidia is having company-specific problems.

Really, the drawdown in NVDA stock reflects a broader pullback in technology stocks since early December. The omicron variant-covid-19 strain might play a role here, but there are other issues at work.

The most evident problem involves supply-chain issues with tech components. There’s been tremendous pressure on suppliers of microprocessors and other components to ramp up production.

An even bigger concern, though, may be that the U.S. Federal Reserve will raise the Fed funds rate this year, which in turn could put upward pressure on government bond yields.

Business Is Still Booming

Of course, that has nothing to do with Nvidia in particular. The market is just rotating out of tech stocks at the moment. Unless you’re anticipating a massive collapse in the Nasdaq for some reason, then there’s no need to panic-sell NVDA stock now.

Truly, Nvidia is showing all of the signs of a business in growth mode. For instance, the company just unleashed more than 160 gaming and Studio GeForce-based laptop designs, along with new desktop and laptop GeForce RTX GPUs and technologies.

On the financial front, Nvidia’s stakeholders have nothing to complain about. The company generated record revenue of $7.1 billion during the most recently reported quarter, representing a 50% year-over-year increase.

Importantly, the company’s gaming-segment revenue totaled $3.22 billion for the quarter. This is an essential part of Nvidia’s business model, and the revenue from this segment indicated 42% year-over-year improvement.

The Takeaway

When the shares of a good company decline in price, the sensible response isn’t just to sell as a knee-jerk reaction.

Rather, informed investors should determine what happened, and what caused the stock to pull back. In the case of NVDA stock, there’s nothing to worry about as the issues aren’t attributable to the company itself.

Sure, if there’s a terrible crash in the Nasdaq, then Nvidia’s shareholders will likely lose capital temporarily. Yet, even if that happens, if you must own shares of any tech business, it might as well be a financially solid one like Nvidia.

On the date of publication, Louis Navellier had a long position in NVDA.  Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.

The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

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Article printed from InvestorPlace Media, https://investorplace.com/2022/01/nvda-stock-decline-is-a-brief-window-of-opportunity/.

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