Chip Stocks Fall Ahead of Nvidia Earnings Report
Semiconductor stocks lost ground Monday, ahead of the latest financial results from artificial intelligence (AI) darling Nvidia (NVDA), due for release after the markets close Wednesday.
Nvidia shares finished 2.3% lower Monday, giving back some of the stock’s gains Friday amid rising expectations for the company’s results. Other chip stocks also lost ground, with the PHLX Semiconductor Sector Index (SOX) falling 2.5% Monday.
Nvidia’s Earnings Could Affect the Broader Market
Nvidia has been a key contributor to the record-setting run for U.S. stocks in 2024, with high expectations for the company’s AI-fueled growth underpinning massive gains. In June, Nvidia briefly surpassed Microsoft (MSFT) as the world’s most valuable company by market capitalization.
Given the chipmaker’s outsized influence in major indexes, a big move in its stock price would affect the broader market.
Analysts have high expectations for Nvidia’s upcoming report, projecting second-quarter revenue and earnings will more than double from the year-ago period. Their forecasts have also climbed in the last few days, which could make it more difficult for the company to impress investors.
Micron and AMD Slip Along With Nvidia Monday
Shares of Nvidia partner Micron Technology (MU) sank Monday as well, falling nearly 4% as Needham reportedly trimmed its price target on the stock to $140 from $150. Analysts cited a flat outlook for shipments of Micron’s DRAM and NAND products.
Other chip stocks that slipped Monday included Lam Research (LRCX) and Advanced Micro Devices (AMD), which lost 3.4% and 3.2%, respectively.
Investors are eagerly awaiting the latest earnings report from Nvidia, a leading artificial intelligence chipmaker. The company’s financial results, set to be released after the markets close on Wednesday, have caused semiconductor stocks to decline in anticipation.
Why Nvidia’s Earnings Matter
Nvidia has been a major driver of the record-breaking performance of U.S. stocks in recent years. The company’s AI technology has fueled its growth and led to significant gains in its stock price. In fact, Nvidia briefly surpassed Microsoft as the world’s most valuable company by market capitalization in June.
Given Nvidia’s significant influence in major indexes, any significant movement in its stock price is likely to have a ripple effect on the broader market. As a result, investors are closely watching the company’s upcoming earnings report.
High Expectations for Nvidia’s Results
Analysts have high expectations for Nvidia’s second-quarter financial results. They are projecting that the company’s revenue and earnings will more than double compared to the same period last year. These optimistic forecasts have been steadily increasing in recent days, which could make it challenging for Nvidia to meet or exceed investors’ expectations.
The rising expectations for Nvidia’s earnings have led to a decline in chip stocks, including Micron Technology, Lam Research, and Advanced Micro Devices. Micron Technology, a partner of Nvidia, saw its stock price drop nearly 4% on Monday after Needham lowered its price target for the stock. Analysts cited a flat outlook for shipments of Micron’s DRAM and NAND products as the reason for the downgrade.
Conclusion
The anticipation of Nvidia’s earnings report has caused semiconductor stocks to decline. Nvidia’s strong performance in recent years and its influence in major indexes have made its financial results a key indicator for the broader market. Analysts have high expectations for the company’s second-quarter results, which could make it challenging for Nvidia to meet or exceed those expectations. As a result, investors are closely watching the upcoming earnings report to gauge the health of the semiconductor industry and the broader market.
Sources: Investopedia
