Monday saw the brutal descent of stocks, with a global sell-off pushing both the S&P 500 and the Dow Jones Industrial Average to their lowest levels in nearly two years. The catalyst for this turmoil? A disappointing U.S. jobs report coupled with apprehensions about the lack of interest rate cuts, leaving investors anxious about the future.
This downturn also cast a shadow over many top performers in the market this year, including the renowned chip designer Nvidia (NASDAQ: NVDA). After a remarkable surge of almost 150% in the first half of the year, the stock plummeted by 11% in just two trading sessions, closing at around $100 on Monday. The question now looms: Amid this market turbulence, is it time to buy, sell, or hold onto Nvidia? Let’s delve into the analysis.
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The Rise and Fall of Nvidia in the Market
Initially, let’s discuss Nvidia’s performance in the stock market. The stock not only surged in the first half of the year but had been consistently on the rise, driven by the company’s impressive triple-digit earnings growth. Nvidia dominates the artificial intelligence (AI) chip market with an 80% share, a significant edge in the current high-demand AI landscape.
Over five years, Nvidia shares skyrocketed by 2,500%, prompting the company to implement a 10-for-1 stock split in June to normalize its soaring stock price. Despite this split, where Nvidia commenced trading at approximately $120, the stock witnessed a 17% decline. Even before the recent sell-off, investors were wary, pondering if Nvidia was losing its momentum. Moreover, rumors of a potential delay in the launch of Nvidia’s new Blackwell chip further added to investor concerns.
Compounded by the broader market tumult due to economic uncertainties, technology and growth stocks bore the brunt of the decline, given their heightened vulnerability during such times. The growth trajectory of these companies relies heavily on customers’ purchasing power and their ability to expand via borrowing, making them susceptible to economic downturns.
The Verdict on Nvidia Investment
Now, in contemplating your course of action with Nvidia, it is crucial to maintain a long-term perspective on stocks and your investment portfolio, even in the face of market volatility. Historical data demonstrates that market fluctuations, whether bullish or bearish, are temporary in nature. While peaks and valleys are inevitable, the silver lining remains that the market has invariably shown growth over time. A glance at major indexes reveals their consistent rebound following challenging periods.
This makes Nvidia an appealing buy or hold option today. Furthermore, purchasing shares now presents an attractive proposition with the stock trading at a modest level of 37 times forward-earnings estimates, down from nearly 50 times just weeks ago. As a frontrunner in the thriving AI market, Nvidia is poised to benefit from the anticipated exponential growth of the AI sector, projected to surpass $1 trillion later this decade. With its steadfast leadership and innovation focus, Nvidia emerges as a formidable addition to any long-term growth portfolio, particularly in the current market turbulence.
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Reflect on the exceptional growth prospects of Nvidia. As per historical data, an investment of $1,000 in Nvidia back in April 15, 2005, would have burgeoned to an astounding $615,516 today. Stock Advisor provides investors with a roadmap to success, offering insights into crafting a balanced portfolio, regular analyst updates, and two new stock recommendations each month. Notably, the Stock Advisor service has outperformed the S&P 500 by over fourfold since 2002.