On Thursday (20 November), the Nvidia (NASDAQ:NVDA) share price opened 4% up, and then was 2% down by the end of the trading day. That might not sound that significant. But it’s huge. This is a company with a $4.5trn valuation. These are huge inflows and outflows of money.
Thursday’s share price action followed Nvidia’s results — released on Wednesday evening after the market closed. The earnings report was originally taken well, with the shares up more than 6% in after hours trading.
So what’s happened? And what changed?
Several theories
In truth, no one really knows exactly why the share price fell. My excellent colleague Stephen Wright suggested the market became a little uncertain about Nvidia’s numbers and credentials, coupled with the CEO telling the market that the deal with OpenAI may not go ahead.
That could be true, but it’s also worth noting that there wasn’t a single downgrade from an analyst following the results. More than 20 analysts issued upgrades to their forecasts or reiterated their position. Yes, analysts can be wrong. But that’s a lot of them pointing in the same direction. The stock’s now 41% below its average share price target.
The next theory, which is certainly a contributing factor, was UK labour data. The US added 119,000 jobs in September, which was more than anticipated. This notion of a stronger labour market puts less pressure on the Federal Reserve to cut interest rates in December. For a variety of reasons, low interest rates give companies and stocks more momentum.
And finally, there’s Bitcoin. Tom Lee, head of research at Fundstrat, suggested that Bitcoin falling below $90k — a technical breakdown in his view — has drained some speculative energy from the broader market. When crypto stumbles, the high-beta end of tech often feels it. It doesn’t explain the whole story, but it’s another weight on sentiment at a time when investors were already looking for excuses to take profits.
Pull all of this together and the picture’s fairly straightforward: none of these factors speak of Nvidia’s operational strength or long-term prospects. They’re macro jitters, positioning flows, and a dash of market psychology. In other words, noise — not signal.
The metrics
As I write, Nvidia stock’s trading around 36 times forward earnings and with a price-to-earnings-to-growth (PEG) ratio of one! The former represents a 78% premium to the information technology sector average. The latter however, is a 34% discount to the sector average.
What does this tell us? The stock’s still heavily valued according to growth prospects. This can lead to increased volatility because forecasted earnings are much less tangible. Instead, it comes down to whether we believe the forecasts and are willing to look beyond the AI bubble accusations.
Personally, I believe Nvidia is absolutely worth considering. It’s integral to the AI revolution and its dominance is clear.
