Why Is Nvidia (NVDA) Stock Down Today?

This week is off to a difficult start for Nvidia (NASDAQ:NVDA) after the semiconductor producer announced last week that it was seeking shareholder authorization to double shares. This measure would see the number of common stock shares rise from 4 billion to 8 billion. NVDA stock reacted poorly to the announcement, but this week brings more bad news for investors. Multiple analyst downgrades have shares falling even further. Indeed, multiple negative industry headwinds continue to raise questions for investors.

Nvidia (NVDA) stock logo on a smartphone.
Source: Allmy / Shutterstock.com

What’s Happening With NVDA Stock

It’s hard to say how much the announcement is affecting NVDA stock. What we do know is two analysts have issued bearish takes on the chip maker. However, it’s also important to note that negative market momentum is pushing down Nvidia’s sector. Advanced Micro Devices (NASDAQ:AMD) and Marvell Technology (NASDAQ:MRVL) are both in the red as well.

Today marks the continuation of a very poor week for Nvidia. Shares were declining before Friday’s announcement, but since then, they have accelerated. As of this writing, NVDA stock is down 5.6% for the day and 19% for the week. While today’s decline has been gradual, the stock doesn’t show signs of a rebound.

Why It Matters

Before Nvidia announced its plan to double shares, Truist analyst William Stein lowered his price target from $347 to $298. While he maintained a “buy” rating on NVDA stock, this lower target is difficult to ignore.

It doesn’t help that more recently, Tristan Gerra of Robert W. Baird downgraded his rating for NVDA to a “hold” and lowered his price target from $360 to $225. Gerra noted that his team believes that “cancellations recently started in consumer graphic processing units (GPUs)” and that consumer demand is slowing. This may be seen as an indication that Wall Street is souring on what was recently hailed as a breakout stock.

If that’s true, it is certainly bad news for Nvidia, a company that deals primarily in GPU production. While it’s no secret that the supply chain crisis has posed constraints for both chip producers and buyers, it’s hard to imagine demand declining by too much. Semiconductors are key components in both gaming and electric vehicle (EV) production. And with the metaverse rising as a defining market trend of 2022, gaming producers are busier than ever. Nvidia’s metaverse applications have compelled many experts making bullish cases for it. As InvestorPlace contributor Faizan Farooque noted, the increasing popularity of VR and metaverse tech will only increase producer reliance on different types of chips.

Yes, doubling shares will likely dilute stock prices. Current investors may not be happy at the news. However, it’s likely that if Nvidia receives the approval it needs, investors will see the share increase as an opportunity to buy the dip on a tech stock with plenty of potential due to its multi-sector applications.

What It Means

While it’s been a difficult year for Nvidia stock, the aforementioned bearish analysts are a minority. The analyst rating consensus on TipRanks is that NVDA stock is a strong buy. Indeed, 20 analysts still maintain buy ratings and bullish price targets.

Additionally, InvestorPlace’s Louis Navellier gives NVDA an A rating in his portfolio grader and sees prices surpassing $300. “This chipmaker will remain a winning investment, thanks to robust demand from existing end-users, plus trends like the metaverse,” he stated.

Overall, the recent declines from NVDA stock should be seen as a buy-the-dip opportunity. While shares are down today, positive market momentum will soon push Nvidia back into the green. The issuing of more shares shouldn’t be regarded as a negative development, and we still don’t know if it will even happen.

On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2022/04/why-is-nvidia-nvda-stock-down-today/.

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