Why Nvidia Stock Sank on Monday

What happened

Shares of Nvidia (NVDA -2.88%) tumbled on Monday, falling as much as 3.9%. As of 11:21 a.m. ET, the stock was still down 3.5%.

While the chipmaker was no doubt caught up in a down day for technology stocks, bearish comments by a couple of Wall Street analysts weighed further on its share price.

So what

Barclays analyst Blayne Curtis lowered his price target on Nvidia to $200, down from $295, while maintaining his overweight (buy) rating on the stock, according to The Fly. The analyst is downplaying recent gains on the semiconductor space, believing there are more declines to come. 

In a note to clients on Monday, Curtis posited the rebound is a “head fake,” further suggesting that a “large cut to earnings” will happen during the next 12 to 18 months. 

Curtis isn’t the only one sounding the alarm. Deutsche Bank analyst Ross Seymore was even more cautious, writing, “The ongoing ‘purgatory’ stage of the semiconductor cycle continues to be in full effect as we head into [second quarter 2022] earnings season.”

Now what

It will be another month before Nvidia shares the results of its most recent quarter, so the musings of an analyst or two about the direction of the broader sector may or may not have a significant impact on the company’s results.

If Nvidia’s prior results are any indication, however, things may not be as bad as analysts are painting them. For its fiscal 2023 first quarter (ended May 1, 2022), the company generated record quarterly revenue of $8.29 billion, up 46% year over year. Excluding the one-time charge for the termination of the Arm acquisition, profits were equally impressive, as adjusted earnings per share of $1.36 climbed 49%. 

Even if Nvidia falls victim to the trends weighing on the broader semiconductor industry, the future looks bright. The company is the undisputed leader in the discrete desktop GPU market with an 81% share in the first quarter. Furthermore, Nvidia is the go-to processor for cloud computing and data center operators, which is the company’s fastest-growing business.

Nvidia stock has lost half its value during the ongoing bear market, which flies in the face of its robust results. Long-term investors will recognize this as an opportunity to get Nvidia shares for a discount.

Danny Vena has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Barclays. The Motley Fool has a disclosure policy.

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