- Hit by an analyst downgrade amid concerns about cryptocurrency demand and the economic impact of Russia’s invasion of Ukraine, Nvidia (NVDA) stock was down 11% last week.
- Friday’s close of $212.58 is a new 2022 low for NVDA stock.
- Investors have an opportunity to buy NVDA shares at a price not seen since last fall.
Nvidia (NASDAQ:NVDA) shareholders saw their dreams of 2022 being a repeat of 2021 (at least 2021 up until November) shattered in January. Even after beginning an extended slide last November, NVDA stock still closed out 2021 worth more than double its value from the start of the year. It posted growth of 125%. However, the slide that began last November continued through January.
When shares finally bottomed out on Jan. 27, they were worth $219.44, meaning they had shed a quarter of their value since the start of the year. After a tumultuous February, shares began a two-week rally in mid-March. Buoyed by analyst projections for huge metaverse and data center revenue potential (read more about that here), NVDA stock looked like it was heading toward $300 again.
The good times didn’t last long. Shares have been in a two-week slide. Last week alone, NVDA stock dropped 11% and closed at a new low for 2022. Here’s what you need to know about the latest NVDA stock weakness and why it offers a buying opportunity investors should take full advantage of.
Why Did NVDA Stock Receive a Downgrade?
There were a number of catalysts behind last week’s continued slide in NVDA’s stock price. Among these were issues we’ve been talking about for some time, including economic factors like rising interest rates that have investors looking outside of tech stocks. The Russian invasion of Ukraine is a part of it. So is the slowing demand for PCs. Cryptocurrency is also a factor, but I’ll deal with that separately.
All of these factors came together last week in a downgrade from Baird. Citing concerns ranging from slowing consumer demand hurting orders from PC companies to Russian sanctions, Baird downgraded NVDA to “neutral.” Baird also steeply slashed its price target for NVDA stock, from $360 to $225.
After the hits to NVDA stock all last week, that new price target represents under 6% upside.
Worried About Ethereum Prices? Don’t, This Isn’t 2018-19
Another issue that has some analysts concerned about Nvidia is cryptocurrency. Specifically, there is worry about Ethereum’s (ETH-USD) “Merge” event. When Ethereum switches from its current PoW (Proof of Work) model — which requires miners to use GPUs to crunch numbers — to PoS (Proof of Stake), demand for graphics cards will drop. The so-called Merge event has been delayed, but Ethereum miners are reportedly already trying to unload their graphics cards.
Combined with PC makers cancelling orders for GPUs due to lower computer sales, this scenario might sound familiar.
Nvidia watchers remember the fall of 2018 all too well. Amid a tanking crypto market, crypto miners sold off their graphics cards. That left Nvidia holding the bag with a glut of unsold graphics cards. The result was three months of pain for shareholders before NVDA stock began to stabilize.
However, 2022 is not going to be a repeat of 2019. For one thing, most of those GPUs that Ethereum miners are trying to sell are specific to the crypto market. Gamers aren’t really interested in them. Declining PC sales may cause a bit of pain for Nvidia, but the growth in that market was a short-term spurt triggered by the pandemic and working from home. The big money GPUs, Nvidia’s RTX 30 series cards continue to be in high demand and continue to be consistently sold out at retailers.
In addition, in the time since the 2018 crypto meltdown, Nvidia has expanded its business in other areas including data center. That further waters down any impact that slowing PC sales or a slowdown in the crypto market might have.
Bottom Line: Should You Buy NVDA Stock Now?
It’s true that there are factors at play that could have a negative impact on Nvidia’s sales. However, I don’t believe the impact will be catastrophic. It is also likely to be short lived. Contrast that with NVDA stock at 2022 lows, and off its 2021 all-time high close by 36%. I can tell you which side of the equation is more interesting.
NVDA is a “B” rated stock in Portfolio Grader, and it’s currently priced to reflect the worst fears about what could happen if everything goes sideways. From my perspective, this is the kind of opportunity investors who are focused on long-term growth dream about.
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. 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.