Nvidia, the leading chip maker, experienced a slight decline in its stock value on Wednesday following a fall the previous day, signaling a temporary pause in its rally. The concerns revolve around a potential market pullback, which has prompted investors to take a cautious approach.
In premarket trading on Wednesday, Nvidia’s stock was down 0.3%, currently trading at $680.50. The previous day, the shares closed at $682.23, reflecting a 1.6% decrease. However, this setback does not overshadow the substantial gains Nvidia has achieved in the past year. In fact, the stock has more than tripled in value, fueled by enthusiasm over its role as a leading provider of chips for artificial intelligence training systems.
Market analysts attribute the recent dip to profit-taking behavior among investors. Furthermore, concerns are growing regarding the narrow rally of the stock market, predominantly driven by big tech stocks. FactSet data reveals that Nvidia currently trades at a price-to-earnings multiple of approximately 43 times its expected earnings for the latest fiscal year.
Highlighting the significance of overall market breadth, Stifel analyst Richard Kneller emphasized the poor internals of the main U.S. indexes, which continue to worsen. This vulnerability elevates the potential for pronounced volatility in the market.
In conclusion, while Nvidia’s stock experienced a minor decline, investors remain watchful of the broader market situation and cautious about potential market fluctuations.
SMIC’s Profit Falls, Raises Doubts over Chip Production
Investors are closely monitoring the recent news from China, as Semiconductor Manufacturing International (SMIC), the largest domestic chip maker, reported a significant 55% decline in quarterly profit on Wednesday. Despite this setback, SMIC remains committed to heavily investing in production in order to manufacture cutting-edge smartphone and AI chips for Chinese technology giant Huawei. However, doubts have emerged regarding SMIC’s ability to compete with Nvidia due to limitations on its access to advanced chipmaking equipment.
Richard Windsor, an independent analyst who publishes Radio Free Mobile, expressed concerns about SMIC’s financial outlook: “As SMIC increases production of these chips, it will either incur greater losses or be forced to charge Huawei higher prices for their working chips.” These concerns impacted SMIC shares, which closed down 8% in Hong Kong.
In the United States, Advanced Micro Devices experienced a slight decline of 0.2% in premarket trading, while Intel’s stock dropped by 0.1%.
On the other hand, Nvidia has seen a significant surge in its stock price, rising by an impressive 26% over the past month, resulting in Tuesday’s closing. This notable increase surpasses the overall market performance with a modest 3.6% growth for the S&P 500 and a 4.3% rise for the Nasdaq Composite Index.
Moreover, Nvidia achieved a trading volume of 68.3 million shares on Tuesday, surpassing its 65-day average of 43.1 million shares.
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