Assessing the Volatility of Nvidia Stock Amidst S&P 500 Rollercoaster – Implications on Semiconductor Market Assessing the Volatility of Nvidia Stock Amidst S&P 500 Rollercoaster – Implications on Semiconductor Market

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By Ronald Tech

Nvidia Corporation NVDA
shares are starting to challenge investors’ confidence as recent bouts of high volatility have clouded its immediate future.

Friday witnessed a whirlwind of emotions for shareholders. The stock surged 2.7% at the opening bell, escalating to a remarkable 5.1% peak above the opening price, hitting a record high of $974.

However, the narrative took a sharp turn later in the day. A sudden reversal in momentum saw the stock plummet to a daily low of $865.06, marking an intense 11.2% swing from peak to trough.

Closing the session at $875.28, Nvidia shares posted a 5.6% decline from the preceding day’s close.

Also Read: TSMC To Win $5B Grant For US Plant To Service Apple, Nvidia Chip Demand: Report

Challenges Faced by Key Indicators

The swift ascent of the stock has left vital indicators like the 50-day moving average trailing behind. The last time the share price retested the 50-day moving average (DMA) was on Feb. 16. Following a $726.58 close in the previous session, the stock endured a 7.1% plunge over the next three sessions, resting at $674.72, still a significant distance from the 50 DMA.

Presently, the 50 DMA stands around $661, marking a considerable retrace for the stock if a pullback ensues.

Could Nvidia, and potentially the broader market, be on the cusp of a correction? Historical data indicates that market corrections, defined by a minimum 10% decline from peak levels, typically occur roughly once every 16 months.

While the last market correction unfolded between July and October 2023, the broader market, represented by the S&P 500, has surged by 25% since then. In contrast, Nvidia stock has significantly outshined the market index, doubling in value over the same period as reported by Benzinga recently.

See also  Exploring Microsoft (MSFT) Before Q4 Earnings The Tale of Microsoft Ahead of Q4 Earnings

As the curtains rise for Microsoft (MSFT) ahead of its fourth-quarter fiscal 2024 earnings report on Jul 30, investors are on the edge of their seats as they await the unveiling of financial numbers that are expected to reveal a growth trajectory. The Zacks Consensus Estimate for revenues hint at an upward trend, with projections at $64.13 billion, showcasing a 14.2% rise from the previous year. Similarly, earnings per share estimates hold firm at $2.90, indicating a potential 7.8% climb year-over-year.

The Symphony of Results

In the previous quarter, Microsoft orchestrated an earnings surprise, outperforming market expectations by 5.91%. This feat wasn't an outlier, as the company has consistently surpassed the Zacks Consensus Estimate in the last four quarters, with an average surprise of 7.38%.

The Art of Projections

While analysts crunch numbers ahead of Microsoft's earnings day, the forecast isn't all sunshine and rainbows. The crystal ball for Microsoft's earnings performance remains hazy, as our analytics fail to definitively predict an earnings beat this time around. With an Earnings ESP of 0.00% and a Zacks Rank of #3, the likelihood of an earnings surprise seems uncertain.

Anticipation and Speculation

Casting a keen eye on the upcoming results, Microsoft's growth narrative is believed to be strongly influenced by its Intelligent Cloud and Productivity and Business Processes wings. Azure and Office 365, the crown jewels in Microsoft's cloud empire, are expected to prominently drive revenue growth. Teams, the enterprise communication platform, has emerged as a pivotal player, expanding its reach and features to compete fiercely in the market.

Market Dynamics and Windows of Opportunity

The stage is set for the More Personal Computing segment, with Windows revenues anticipated to benefit from surges in Windows Commercial products and cloud services, fueled by a notable uptick in personal computer demand. The traditional PC market, following a historical trend of decline, saw a resurgence in the second quarter of 2024, underlining a shift in consumer preferences and market dynamics.

The Showdown: Price and Valuation

When it comes to the stock performance arena, MSFT has showcased a return of 17.8% year-to-date, slightly trailing the broader Zacks Computer & Technology sector. Competitors like HPE and AAPL have put up a strong show, while others like LNVGY have faced headwinds.

The Visual Symphony of Progress

Highlighting the year-to-date performance, a visual representation of Microsoft's journey provides insights into the stock's movements amidst sectoral dynamics and market trends.

Insights into Microsoft's Financial Landscape
Insights into Microsoft's Financial Landscape

Anticipating Institutional Investor Concerns

Cathie Wood, CEO of ARK Investment Management, articulated concerns in Bloomberg Businessweek about a plausible correction in the semiconductor sector.

“The one place we could see a correction — and it’s just a correction, we’re not calling it the end of this at all — is in the chip space,” she remarked.

Echoing these sentiments, Jeff Kilberg, founder of KKM Financial, cautioned on CNBC, suggesting, “Monday could be a rude awakening.” As of the latest data on Monday, Nvidia shares were trading 0.7% lower at $869.00.

On Friday, the semiconductor market witnessed broader repercussions as Nvidia encountered a downturn.

Broadcom Inc. AVGO, following its quarterly earnings release post Thursday’s market close, triggered a ripple effect. Though the company exceeded Wall Street expectations in earnings and revenues, the lack of immediate visibility into the near-term outlook disappointed investors anticipating robust future earnings.

Consequently, Broadcom shares witnessed a 7% decline on Friday. Other chip stocks like Intel Corp INTC slid 4.6%, and ON Semiconductor Corp ON fell 4.8%.

The VanEck Semiconductor ETF SMH, which holds 27% of its portfolio in Nvidia, observed a nearly 4% decline on Friday and was down 1.5% at the time of publication on Monday.

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Image created with a photo from Michael Vi/Shutterstock.