Editor’s note: This column is part of InvestorPlace.com’s Best Stocks for 2022 contest. The Reader’s Choice pick for the contest is Nvidia (NASDAQ:NVDA) stock.
Three months ago, InvestorPlace.com readers and analysts weighed in on the stocks they believed would see the biggest returns in 2022. You all collectively picked Nvidia (NASDAQ:NVDA) as your stock of choice for the year following two consecutive years in which NVDA stock doubled in price.
So far this year, though, NVDA stock is hurting with a 17% loss year-to-date (YTD), leaving many to wonder if it can make up the difference in the remaining three quarters of the year.
Needless to say, the last three months haven’t gone exactly how anyone planned, and investors — and society at large — have had to scramble to figure out what to do next. We’ve seen the price of oil rise dramatically with the Russian invasion of Ukraine, inflation reach highs it hasn’t seen in decades and we haven’t seen an end to the chip shortage and supply chain bottlenecks.
So, while Nvidia stock is down, it’s easy to handwave this as being part of the larger downturn in stocks. After all, if everything is performing poorly, why wouldn’t Nvidia also be performing poorly? And if that’s the case, then an argument could be made that investors holding NVDA stock should just hunker down and wait; The downturn can’t last forever, right?
In order to answer that question, we’ll first try to quantify how Nvidia is doing compared to the rest of the market, and then we’ll look at the catalysts I identified before the quarter began that investors are excited about. Now, let’s dive in and take a closer look at NVDA stock.
How Is the Nasdaq Doing?
Nvidia is one of seven stocks in the Nasdaq with a market capitalization of $500 billion or more, along with Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Tesla (NASDAQ:TSLA) and Meta (NASDAQ:FB).
Overall, the Nasdaq Composite — an index that tracks nearly every Nasdaq stock — is down by more than 11% YTD. The reasons why companies choose to list their stock on one exchange or another are complicated and unique for each company. But, as a rule, the Nasdaq is far more tech-oriented than the other major American exchange, the New York Stock Exchange.
So if the Nasdaq is down by 9%, that must mean a lot of the biggest hitters are down by similar amounts, right?
Well, not exactly. Nvidia’s 17% drop YTD is pretty close to that number. And Microsoft, which is down nearly 11% YTD, also comes close. However, Tesla is actually down around 1% YTD, Apple is down 3.2%, Amazon is nearly 5% lower and Alphabet is down almost 6%. The big outlier, though, is Meta — down nearly 34% following a disastrous earnings report.
In other words, if you’re a major company on the Nasdaq, unless you’re Facebook, Nvidia or (arguably) Microsoft, reports of your death are greatly exaggerated. So if and when economic recovery comes to the market as a whole, all those other companies will have a healthy head start.
What Is Nvidia Doing Now?
When I wrote about Nvidia’s prospects for 2022 late last year, I noted that many readers seemed excited about the metaverse and electric vehicles (EVs) and that Nvidia could play a pivotal role in both of these areas. With that in mind, there’s some good news for anyone who thinks those areas are the key to Nvidia’s future success.
Earlier this year, Nvidia announced new features coming to its Omniverse platform. In the firm’s words, Omniverse is “a multi-GPU-enabled open platform for 3D design collaboration and real-time physically accurate simulation”. And in a blog post published late last year, Nvidia described how Omniverse could be used to design metaverse environments. The company describes various ways that metaverse applications can have real-world benefits, like optimizing how 5G networks might be constructed in city environments.
Additionally, Nvidia continues to partner with electric vehicle manufacturers to help them step up the quality of their software. With that in mind, as oil prices continue to rise, it’s three to six times cheaper to drive an electric car than a gas-powered car in the U.S. So plenty of drivers will be happy to turn to cars powered by Nvidia tech in the coming months and years.
Collectively, with the metaverse tailwinds and operations in the EV market, Nvidia has plenty of catalysts ahead. In turn, NVDA stock could bounce back from its early-year woes.
Where Are Nvidia and NVDA Stock Headed This Year?
Of course, the first three months of 2022 haven’t radically changed how much the average person interacts with the metaverse. In fact, it’s very likely that the average person probably spent zero time interacting with any sort of advanced metaverse this year. And just because gas prices are high doesn’t mean everyone’s going to rush out to buy the latest EV tomorrow.
Overall, these are catalysts for NVDA stock, sure, but they’re long-term catalysts. The market often responds to long-term catalysts, of course, but it also responds to what’s happened in the past. In other words, the best shot Nvidia has at seeing its stock price rise might be impressive earnings. When Nvidia released its Q4 earnings — which beat expectations — though, the stock price dropped as a result.
However, Nvidia still gets to report earnings three more times this year. We’ll get to find out in another couple of months or so just what the company has been up to this quarter financially, and that might just be where the real answer lies for the company.
So, if you’re an investor of NVDA stock, just hold on for the ride.
Avril Ayers is a web editor for InvestorPlace.com. On the date of publication, they did not hold any position (either directly or indirectly) in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.