- Nvidia Corporation (NVDA) shares closed at $195.15 on Friday.
- That marks the lowest price for NVDA stock in 2022, and its lowest close in nine months.
- NVDA stock may still feel the impact of broad economic factors in the short-term, but investors buying now get a low price and the strong likelihood of long-term growth.
Nvidia (NASDAQ:NVDA) has been a favorite among growth investors and with good reason. In 2017, shares delivered a return of over 80%. 2018 was an off year. Growth momentum was continuing until the crypto market crashed. Faced with the loss of the lucrative crypto market and a glut of graphics cards, NVDA stock dropped off a cliff during the final few months of that year.
However, in 2019 the company quickly turned the situation round. It ended up that year with over 75% growth. In 2020, the pandemic couldn’t stop Nvidia. On the contrary, with demand for PC gaming rigs driving graphics card sales, Nvidia shareholders enjoyed 120% returns. 2021 was on track to be even better. Up until mid-November, NVDA was up 152% on the year. Even with the impact of the tech stock selloff that began last November, NVDA closed out 2021 up 125% for the year.
Last Friday, NVDA closed at $195.15, a new low for 2022 and its lowest close since last July. For some investors, this is a signal that it’s time to hold off on investing in this company. For smart investors looking to build up their growth portfolios, NVDA stock at this price is tough to resist.
NVDA Stock Is Impacted by Outside Factors
A bargain-priced stock is not really a bargain when the company is underperforming. However, Nvidia is the exact opposite of this. The company has been on an extended roll and its future looks even brighter. Graphics cards and GPUs were primarily of interest to PC makers — especially those producing PC gaming rigs — for years. However, over the past decade, the massive parallel processing capability of GPUs has made them central to our most advanced technological innovations, including AI and machine learning.
Let’s look back at Nvidia’s last quarter to put this in some perspective. The company reported record fourth quarter revenue of $7.64 billion. That was up 53% year-over-year. Nvidia set record quarterly revenue numbers for three different divisions: Gaming, Data Center and Professional Visualization. Adjusted earnings-per-share of $1.32 was up 69% YoY. Both revenue and earnings beat market expectations. The company’s guidance for $8.1 billion in revenue for Q1 also sailed past analyst projections.
So why is NVDA stock — which was already slumping in 2022 — down another 26% since then?
The answer largely lies in outside factors. Nvidia is performing well and it is well-positioned to benefit tremendously from future developments like the metaverse. But the market has been spooked by a range of factors, including rising interest rates, runaway inflation, war in Ukraine, continued Covid-19 outbreaks with lockdowns in China and the growing risk of recession.
NVDA stock — like many tech stocks — has been essentially caught in the crossfire.
Are There Risks for Nvidia?
If you assume that Nvidia will be minimally impacted by most of these broad issues, are there any direct risks to NVDA stock that investors should be aware of?
The reality is no stock is bulletproof, and that includes NVDA. It currently earns a “B” rating in Portfolio Grader, which reflects the fact that there are some risks. While crypto mining is far more managed by the company than it was in 2018 — specialized crypto cards will help reduce the impact of crypto miners flooding the consumer market with used graphics cards — a big crash in that market would undoubtedly have some ripple effect on NVDA stock. The metaverse seems like an inevitability, but it could take longer than expected to gain steam.
Recession is one of those outside factors that really could have a direct impact on Nvidia’s business. From a consumer perspective, graphics cards for a gaming PC are a discretionary expense. If a recession were to hit, corporate capital spending on areas like data centers could also take a hit.
The reality is that the biggest risk right now for NVDA stock is volatility. That’s mostly short-term, but something on a larger scale like a global recession would obviously have a more lasting effect.
Should You Buy NVDA Stock?
Investors who are worried about the potential for economic factors like a recession to broadside growth stocks like Nvidia, along with those who have a low tolerance for short-term volatility, may want to steer clear of NVDA stock for now.
For everyone else, NVDA stock at eight month lows is hard to pass up. It may drop further this year, but even if that happens, you can be fairly certain that in the long term, this stock is going to deliver growth.
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.