Now that GPU prices are finally falling, margins for Nvidia (NASDAQ:NVDA) will remain under pressure, making the stock risky. Shares of the semiconductor firm are already down 33% in the year thus far.
NVIDIA is set to take a breather shortly as its rapid growth trajectory slows. It’ll be worth watching whether this dramatic shift for NVIDIA will fuel more stock volatility.
It’s been a matter of luck for nearly two years as to whether you’ll be able to purchase a gaming console or graphics card without paying an exorbitant price. You either wait for the prices to drop and hope you get one at just the right time (or proactively seek out an auction that could save you some cash). The chip shortage was causing issues and GPU prices were sky-high for a while. But a recent change led to prices falling to more normal levels.
Tom’s Hardware reported in January that prices had finally started to drop, and they did. Prices have taken an average of 30% off since then. The prices of Nvidia GPUs are getting cheaper, and I noticed the price floor for an RTX 3060 Ti has fallen substantially to approximately $580. The price floor for an RTX 3070 Ti is also about in line with a similar drop.
Nvidia has been at the forefront of technology for a long time. It was the first to launch a GPU with GDDR5 memory in 2006. Nvidia’s Kepler architecture is one of the most powerful GPUs globally that can be used for gaming and processing complex visual effects.
Nvidia also has an AI-powered computer processor called DGX Station 2 with 16 Intel Xeon CPUs, 256 Tesla V100 GPUs, and 128 GB of RAM. Developers can use this computer for deep learning applications such as speech recognition and image recognition.
Nvidia is a company that has been around for more than 20 years. It has helped to shape the computing industry with its graphics processing units.
But NVDA is a risky stock because of the broader issues affecting the tech space, such as interest rates and inflation. Company-specific problems are also not helping matters. However, given those issues, it’s still worth investing in this company. The thing to note will be the timing.
NVIDIA has not been as popular with investors, further exacerbating the problem. Without any catalysts on the horizon, NVIDIA’s shares have nowhere to go but down. It’s difficult to predict short-term stock movements, but in the case of Nvidia, the downside risk is more prominent. This may provide reasons for investors to rethink their view on Nvidia for now.
On the publication date, Faizan Farooque did not have (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.
