NVDA Action: Short Term Challenges Won’t Hold It Long Term
Nvidia Company (NASDAQ:NVDA) stocks saw a three-week run after falling sharply in mid-July. Can NVDA’s stock continue? It is feared that he will stumble before the end of the year. In fact, many financial analysts have 12-month price targets that reflect a small downside for shareholders compared to current prices.
This sentiment reflects the fact that Nvidia faces short-term challenges. But any of these issues are highly unlikely to derail their stock in any major way. And once those issues are in the rearview mirror, it’s just an open highway for NVDA stock. It should then continue on its impressive long-term growth path.
Concerns about semiconductor shortages
It’s not really news that we are in the midst of a global semiconductor shortage that is crippling many industries. Nvidia is considered a semiconductor company – which is good – but it’s a factory-free business, which raises some concerns.
Nvidia subcontracts its chip production to third parties. These foundries are under incredible pressure to fill orders and their limited capacity is the bottleneck causing the current shortage.
Nvidia has been hit by the chip shortage, so demand for its graphics cards has outpaced supply throughout the past year. With chipmakers scrambling to expand their foundry capacity, this supply constraint will eventually ease.
The challenges of making the arm deal
Last September, Nvidia announced that it was spending $ 40 billion to acquire a designer of custom chips. Arm. The company announced the creation of:
“… the leading IT company in the age of artificial intelligence, accelerating innovation while expanding into large, high-growth markets. “
As the Arm deal cleared the first regulatory hurdles, there are growing fears that it will be blocked. In the last news, CNBC reports that the UK may reject the takeover on national security grounds.
If the Arm deal goes through, that’s good news for NVDA shares. But even when it failed, Nvidia performed spectacularly without Arm’s expertise. There is no reason to believe that the company will not continue to do so without Arm.
NVDA stock will likely be negatively affected if the deal isn’t done, but that would be a short-lived reaction to the news. In fact, it closed more than 1% higher on Wednesday, the day after the UK’s reluctance to approval was announced.
The cryptocurrency market and NVDA stocks
Much of the concern about Nvidia centers around the cryptocurrency market. This is understandable. In 2018, NVDA stock was hammered when the bottom fell from the crypto market.
When Bitcoin (CCC:BTC-USD) and other cryptocurrencies fell in value, no one was buying graphics cards for crypto mining platforms. In fact, the crypto miners turned around and sold their graphics cards back to gamers. Nvidia has been hit by a double whammy of dry crypto demand and a market awash in used graphics cards.
However, as I wrote in July, it is not 2018. The company has since taken steps to isolate itself. It still makes money when cryptocurrency miners buy, but it’s less vulnerable to the effects of falling cryptocurrency prices.
Cryptocurrency volatility was once again in the spotlight in 2021. After surpassing $ 63,000 in April, Bitcoin fell below $ 30,000 in July. This volatility possesses would hurt the NVDA share price. In mid-July, NVDA collapsed along with the decline in Bitcoin prices.
However, the crypto market represents a small fraction of this company’s revenue. Any impact on Nvidia’s share price due to the cryptocurrency’s price movement – good or bad – is a short-term variable.
Review of NVDA actions
Nvidia shares have a “B” rating in Portfolio filing cabinet. They’re a reasonably solid investment, whether you think of them as a semiconductor game, a leader in graphics chips, or a part of the cryptocurrency market.
If you bought NVDA stock when I posted my semiconductor stock list in February, you’re looking at a 33% return. Not bad for six months, especially in a year when tech stocks struggled.
I’m not saying NVDA stocks can keep that kind of growth going. Indeed, among the 37 analysts followed by CNN Affairs, NVDA’s 12-month median price forecast of $ 193.75 has a value of 5% inconvenience. However, those same analysts overwhelmingly rated NVDA as “Buy”. Why the apparent disconnection?
Analysts recognize that Nvidia may face short-term issues, such as contract manufacturing plants to max, challenges in the Arm deal, and instability in the crypto market. But overall, the stock is poised to continue its long-term growth path.
As of the publication date, Louis Navellier had a long position on NVDA. Louis Navellier did not have (directly or indirectly) any other position on the securities mentioned in this article. The InvestorPlace research staff member primarily responsible for this article did not hold (directly or indirectly) any position in any of the securities mentioned in this article.
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