Nvidia stock falls more than 6%, reversing Wednesday’s rally as chip stocks lead market lower

🌈 Abstract

The article discusses the decline in Nvidia (NVDA) stock, which fell more than 6% on Thursday as chip stocks led a tech-fueled sell-off amid signs of a cooling economy. The article also covers the following key points:

🙋 Q&A

[01] Nvidia Stock Decline

1. What led to the decline in Nvidia's stock price?

• The decline in Nvidia's stock price was due to a broader sell-off in the tech sector, triggered by weak economic data released during the session.
• This reversed the prior session's 12% rally in Nvidia's stock, which was driven by better-than-expected quarterly results and guidance from peer AMD.

2. What are the key factors that could impact Nvidia's revenue trajectory?

• Nvidia's largest customers, including Meta, Amazon, Alphabet, and Microsoft, account for more than 40% of its revenue.
• Microsoft, which makes up roughly 19% of Nvidia's revenue, expects to increase its infrastructure investments in fiscal year 2025 more than it did in 2024.
• Meta, which accounts for around 10% of Nvidia's revenue, also expects to see "significant" capital expenditures growth in 2025.

3. How does Nvidia compare to its competitors in the AI chip market?

• Nvidia is seen as the main beneficiary of the AI frenzy, with its stock up roughly 130% year-to-date, while rival AMD is down around 9% since the start of 2024.
• According to the analyst, Nvidia will continue to have a hold on the AI chip market, with AMD being a good second supplier.

[02] Analyst Perspectives

1. What are the key drivers of the recent decline in Nvidia's stock price, according to Morgan Stanley?

• Morgan Stanley's analysts cited five main drivers of the recent decline in Nvidia's stock price: spending plans, competition, export controls, supply chain fears, and valuation worries.
• However, the firm maintained its Overweight rating and $144 price target on the stock, stating that "the earnings environment is likely to remain strong, for Nvidia and for the whole AI complex."

2. What is Morgan Stanley's outlook for Nvidia's earnings?

• Morgan Stanley's analysts believe that "through those concerns, the earnings environment is likely to remain strong, for Nvidia and for the whole AI complex."