Nvidia Stock Temporarily Stalls Amid Earnings Anticipation

Nvidia’s impressive stock rally experienced a pause on Tuesday as investors expressed concerns about whether the upcoming quarterly results would align with the company’s high valuation.

Shares dropped 5.3% to $687.91, marking the potential for the most significant percentage decline in over eight months.

Central to the excitement surrounding artificial intelligence (AI), Nvidia’s stock has soared by more than 40% this year, propelling it past Alphabet (GOOGL.O) to become the third most valuable U.S. company, trailing only behind Microsoft (MSFT.O) and Apple (AAPL.O).

As of last Friday, Nvidia’s market capitalization stood at $1.79 trillion.

“The market is maybe a little bit hesitant whether they (Nvidia) can deliver strong enough guidance to push the market even higher,” observed Frank Lee, Head of Technology Research at HSBC.

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The tech company is set to report its quarterly results on February 21, with analysts anticipating earnings of $4.56 per share and a revenue increase to $20.378 billion from $6.05 billion a year earlier, according to LSEG estimates.

However, Nvidia’s remarkable performance this year, which has led to new peaks and significant gains in the U.S. stock markets, could leave the stock vulnerable if the earnings fail to exceed expectations.

“You can’t come out and simply meet or slightly beat for the stock to go higher. Nvidia’s going to need to blow it away,” stated Dennis Dick, a trader at Triple D Trading.

Options for Nvidia are indicating a potential swing of about 11% in either direction following the announcement of results, based on data from options analytics service ORATS.

The uncertainty has also impacted other AI-focused stocks, with Super Micro Computer (SMCI.O) experiencing a 11.6% decline and Arm Holdings dropping 7.3%. Advanced Micro Devices (AMD.O), which had seen double-digit gains year-to-date, was down nearly 6%.

Currently, Nvidia’s shares are trading at 32 times its forward earnings estimates, compared to the industry median of 25.4, highlighting the high expectations investors have placed on the company’s performance in the AI sector.

About Nvidia

Nvidia Corporation, headquartered in Santa Clara, California, is a global leader in the design and manufacture of graphics processing units (GPUs) and AI technologies. Founded in 1993, Nvidia has revolutionized the world of computing, gaming, and AI with its innovative products and solutions.

The company’s GPUs are widely used in gaming, professional visualization, data centers, and automotive applications. Nvidia’s advancements in AI have positioned it at the forefront of the industry, driving developments in machine learning, autonomous vehicles, and more.

With a strong commitment to research and development, Nvidia continues to push the boundaries of technology and remains a key player in the global tech landscape.