Why Nvidia Stock Cratered Friday |  The Motley Fool

Why Nvidia Stock Cratered Friday | The Motley Fool

What happened

Shares of Nvidia (NVDA -2.51%) continued to fall on Friday, dropping as much as 8%. As of 1:41 p.m. ET, the stock was still down 7.5%, ending a week in which shares fell about 10%.

While the chipmaker has undoubtedly been caught up in the broader market decline, bearish comments from two Wall Street analysts have added further pressure to its stock price.

So what

Wells Fargo Analyst Aaron Rakers lowered his price target on Nvidia to $250 from $370, while maintaining his overweight (buy) rating on the stock, according to The Fly. He expects solid growth from Nvidia’s data center segment when the company reports its fiscal 2023 first quarter results next week. That said, the analyst will be listening carefully to management’s comments regarding demand visibility, momentum and progress of the Hopper product cycle. Rakers posits that any signs of weakness or slowing growth would not be warmly welcomed by investors.

A smiling gamer competing in esports with his teammates.

Image source: Getty Images.

Meanwhile, Daiwa’s Louis Miscioscia has sounded the alarm bells for the entire semiconductor industry, saying he foresees a “danger zone” over the next six months. So far, demand for semiconductors “remains strong with results up and up,” but he thinks the market signals the coming of a recession. The analyst said that until we have more clarity on the overall economic situation, the market “may continue to be driven to new lows due to fear and uncertainty.”

Now what

It is important to put this news in context. During its fourth quarter of fiscal 2022 (ended January 30, 2022), Nvidia generated record quarterly revenue of $7.64 billion, up 53% year-over-year, as well as record sales in each of its major operating segments. Earnings were even stronger, with earnings per share of $1.18 jumping 103%.

Not all quarters will be records. The possibility of a slowdown in demand in the coming months, or even the specter of a recession, should not have any consequences for long term investors. By their very nature, investment banks think in terms of the three months ahead. However, investors looking at three to five years will recognize this as background noise and instead focus on Nvidia’s industry-leading position and its huge opportunities.


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