Down 6% last month! Is it time to sell my Nvidia stock?

Nvidia has been a star stock due to its blistering performance lately. But last month the shares took a tumble. Should this Fool be panicking?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: NVIDIA

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

It’s not often Nvidia (NASDAQ: NVDA) is making headlines for its stock price falling. So, when the shares fell 6% last month, it’s safe to say it grabbed my attention.

That being said, its weak performance in July hasn’t made much of a dent in its gains this year. During 2024, the stock is up a whopping 142.9%. Zooming out, it has risen 150.4% in the last 12 months.

Nvidia has taken the market by storm in recent times. No doubt some lucky shareholders have become rich.

Should you invest £1,000 in Vaneck Ucits Etfs Plc - Vaneck Global Mining Ucits Etf right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Vaneck Ucits Etfs Plc - Vaneck Global Mining Ucits Etf made the list?

See the 6 stocks

But with its share price being volatile last month, is that a sign of what’s to come? As a shareholder, is now the time for me to take my profits and get out?

Volatile spell

It was a topsy-turvy month for the chipmaker. Nvidia entered July at $124.3 and finished at $117.1. It rose as high as $134.9 and fell as low as $103.7.

When a stock rises as quickly as Nvidia has in the past couple of years, some volatility should be expected. In the stock market, peaks and troughs are inevitable.

Cause for concern?

But should its performance in July be a cause for concern for investors? Potentially.

I’ve voiced my worry about Nvidia’s valuation over the past couple of months. While I understand that many tech stocks tend to trade at a premium, with a price-to-earnings (P/E) ratio of 68.5, Nvidia does look particularly expensive.

I guess one of the best ways to judge just how pricey the stock is right now would be to compare it to the remaining ‘Magnificent Seven’ of giant US tech stocks. So, let’s do just that.

The average P/E ratio for the group is 43.1. The highest, excluding Nvidia, is Tesla (61.8). The lowest is Alphabet (24.6). Based on that, Nvidia could be deemed overpriced. There’s a threat that its current valuation could prompt a share price correction.

Impressive performance

Then again, who’s to say the stock can’t just keep soaring?

The company has been flying, consistently beating analysts’ expectations. Its last update came back in May. For the quarter, revenue rose to $26bn, up 18% from the previous quarter and a staggering 262% year over year. Jensen Huang, founder and CEO, stated that “the next industrial revolution has begun”.

Time to sell?

I recently offloaded some of my Nvidia shares. My position was up by over 200% and it made sense to rebalance my portfolio. I used the cash to buy more HSBC shares with their 7.2% dividend yield.

Despite its lofty valuation, I do see long-term value in Nvidia, even at today’s price. So, for now, I’ll be keeping my remaining shares.

Its cutting-edge innovation will keep it at the front of the pack in the booming artificial intelligence industry. That bodes well for future growth prospects. And Huang is a visionary leader.

My only concern is that Nvidia can’t keep up this impressive level of growth forever. When it inevitably slows, we could see its share price pulled back.

I’m holding on to my shares. But I won’t be adding to my position, even with the stock taking a hit in July.

Should you buy Vaneck Ucits Etfs Plc - Vaneck Global Mining Ucits Etf now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Charlie Keough has positions in Nvidia. The Motley Fool UK has recommended Alphabet, Nvidia, and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »