Amid a 14% Sell-Off, Nvidia Just Hit Investors With a Rude Awakening. What Should Investors Do?

Capital markets have had a strong start to 2024. However, Standard & Poor’s 500 and Nasdaq Composite Some companies have given up some of their gains over the past month or so as stocks have seen significant selling activity. As of the time of writing, stocks are down artificial intelligence (Ay) dear Nvidia (NASDAQ: NVDA) It is down about 14% in the last month.

While some of the decline can be attributed to the broader market sell-off, Nvidia has recently surprised investors with some disappointing news. Should investors be alarmed by this dilemma, or is this a rare opportunity to buy the hottest AI stocks when they’re down?

What’s happening with Nvidia stock?

There are several factors that have been influencing the movement of Nvidia stock price lately.

For starters, the unemployment rate unexpectedly rose to 4.3% in July—its highest level in more than two years. Moreover, recent comments from the Federal Reserve continue to have economists wondering whether an interest-rate cut is on the horizon.

All things considered, the murky macroeconomic picture coupled with some typical election-induced volatility has certainly caused some investors to start selling stocks and hoarding cash amid a host of uncertainties. Unfortunately, that’s only one side of the equation for Nvidia investors. Perhaps more worryingly, Nvidia’s long-awaited Blackwell graphics processing unit (GPU) is facing delays due to design flaws, according to multiple media outlets.

Given that companies of all sizes and across all industries are doubling down on their investments in generative AI, NVIDIA’s delay at Blackwell doesn’t inspire confidence. However, I don’t think that’s necessarily a reason for investors to hit the panic button just yet.

Why isn’t Blackwell’s delay a big deal?

While estimates vary, general research suggests that Nvidia owns at least 80% of the AI ​​chip marketSo while the Blackwell launch delay may be a minor event, it’s highly unlikely that Nvidia will lose significant market share as a result of this design mistake.

Paul Meeks, chief investment officer at Harvest Portfolio Management, expressed similar sentiments in an interview on CNBC. He made the important point that demand for Nvidia’s GPUs is so high that the company will have no real problem selling Blackwell chips once they hit the market — no matter the delay.

Additionally, every one of the “Magnificent Seven” companies reported earnings this season except Nvidia. One common thread connecting the big companies is that spending on AI-powered products and services has been steadily rising over the past year. In particular, capital expenditures have been on the rise among the big tech companies as demand for cloud computing infrastructure, data center services and semiconductor chips has increased.

The story continues

Given that the bulk of NVIDIA’s revenue growth currently comes from its hardware operations in chips and data centers, I believe the increased investment in capital spending among major tech companies represents a compelling secular narrative about NVIDIA’s bright future.

Buy the dip like there’s no tomorrow.

When investors receive some disturbing news, it is always important to consider all the variables.

In 1997, apple Apple almost went bankrupt. Today, Apple is the world’s largest company by market capitalization. Even the best companies face setbacks from time to time. What matters most is how management handles those challenges now.

The chart below shows Nvidia’s price-to-earnings (P/E) ratio and price-to-free-cash-flow (P/FCF) multiple over the past month. While a 14% drop in Nvidia stock may not seem like much in the grand scheme of things, the pressure this has put on valuation multiples in such a short time frame should not be overlooked.

Beyond GPUs, the company has been quietly building a software platform to complement its core chip business. Additionally, the company has made a number of strategic investments in areas like robotics to further diversify its AI ecosystem.

I don’t see any of these initiatives being priced into Nvidia’s stock price right now. In fact, I think a lot of what Nvidia is doing outside of GPUs is not fully understood yet. For these reasons, I think the reaction to Blackwell’s delay is overblown and I see the recent selloff as a no-brainer opportunity to buy Nvidia stock now that more gains appear to be in store for us in the long term.

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Adam Spatako He holds positions at Apple and Nvidia. The Motley Fool holds positions at and recommends Apple and Nvidia. The Motley Fool has Disclosure Policy.

Amid 14% sell-off, Nvidia surprised investors with an unexpected surprise. What should investors do? Originally posted by The Motley Fool