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Thursday was a tough day for investors. Nivea (NASDAQ:NVDA) stock price fell 8% yesterday, meaning the By 2022, that means the stake is down to 55%. As Nvidia stock hits a 52-week low, does this represent a buying opportunity for me?
The failure of technology
NVIDIA is involved in many industry and technology trends that could shape the future. Work in artificial intelligence (AI) and computer graphics is driving innovations in healthcare, transportation, and even the metaverse.
So why is the stock declining? The US government’s crackdown on chips exported to China is behind yesterday’s decline.
In an SEC filing on Wednesday evening, it said it had been told to stop shipping two high-end computer chips to China that are used for AI and supercomputing. Tensions are high between China and the US over Taiwan. Tech focused on these developments and the US decided to block the sale of some AI chips to China. The US government is concerned that these chips could be used by the Chinese military to use new technologies.
These geopolitical trade tensions affect Nvidia and some of its competitors. While it’s impossible to predict the long-term impact, Nvidia predicts a $400 million impact for this quarter alone.
Nvidia has growth opportunities beyond AI, but there is no doubt that this is an important part of the business. The technology is still in its infancy and any breakthroughs could create lasting competitive advantages. This is why the US government considers exporting chips a matter of national security.
Nvidia Stock: Bull vs Bear
Given the $400M impact this quarter, it’s easy to make a bear case so that’s where I’ll start. Not only will this turbulence create uncertainty, but macroeconomic conditions may also create greater volatility. The company is battling inflation and a potential economic slowdown, which could dampen demand for its chips.
The current assessment is based on future growth and does not seem like a bargain to me. Nvidia stocks have a price-to-earnings (P/E) ratio approaching 40 and a forward P/E of nearly 45.
This assessment is expensive but probably reasonable. It is involved in exciting industries with excellent growth opportunities. However, the past 12 months have been remarkably volatile for growth stocks across all sectors and markets. Big swings in stock prices are likely to continue for some time yet.
However, it’s not all doom and gloom. From self-driving cars and supercomputers to changing work and games in the metaverse, the semiconductor industry’s long-term outlook holds much promise.
I’m not in a rush to buy Nvidia stock today because the news is still developing and coming in. However, after losing half of its market value in less than a year, I saw an opportunity to generate strong profits in the long term.
To reiterate, the next few months and even years may be turbulent, but over a 10-year period, strong businesses like Nvidia should be able to ride out the current economic and geopolitical tide.