Investors’ reaction to Nvidia’s earnings was more revealing than the numbers themselves. Prior to earnings, Bespoke Investment said it was “almost a foregone conclusion” that Nvidia would raise guidance, so the reaction would give a “good idea of the market tone” heading into spring.
The subsequent sell-off tells its own story. The stock, already shaky before earnings, nosedived, falling 28 per cent below January’s peak.
Now, steep corrections are common with Nvidia. In 2024 alone, it suffered multiple sell-offs, including three big declines ranging from 21.9 to 35.6 per cent. In each of those instances, buyers quickly bought the dip, with shares soon hitting new highs.
In contrast, notes Bespoke, the latest correction brought the stock to its lowest level in almost six months – something not seen since Nvidia skyrocketed with the launch of ChatGPT in late 2022. Nvidia, it says, “looks like it’s breaking down”.
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Whatever about the technicals, the fundamentals look solid, says Bernstein’s Stacy Rasgon. Rising earnings coupled with falling shares means the stock is cheaper, with Nvidia trading at just a “slight premium” to the S&P 500. It now trades on 25 times estimated earnings, one of the lowest levels of the last decade.
Bernstein is bullish, saying the derating “feels a little stunning”, but sentiment has changed. It leaves Nvidia a cheaper stock, facing a market less willing to believe.
