Investors had few reasons for optimism at the start of July, with Nvidia tumbling 15.3% in the first week. The stock continued to fall two weeks into the month as analysts reduced its target price and prepared for disappointing quarterly results in mid-August. However, the stock began to soar on July 15, as drafted legislation concerning semiconductor production picked up steam.
At the start of July, fellow chip company Micron Technology released quarterly predictions 45% lower than Wall Street’s expectations. The company’s stock subsequently fell 6%, with a domino effect leading Nvidia stock to fall 3.3%.
As a result, multiple analysts cut their price target for Nvidia stock. Bank of America‘s Vivek Arya cut the target price from $270 to $220 while continuing to recommend the stock as a buy. Then on July 8, Ivan Feinseth of Tigress Finacial Partners retained his buy recommendation while lowering his price target from $410 per share to $310. Analysts mainly cited reduced consumer spending from economic concerns and a decline in the crypto market for their reduced target prices.
However, Nvidia stock rallied 2.2% on July 15 when, as reported by Business Insider, “Speaker of the House Nancy Pelosi’s husband, Paul Pelosi, exercised millions of dollars in Nvidia call options.” The move came ahead of the Chips Act bill drafted in the Senate, which would provide $52 billion in subsidies to bolster American semiconductor manufacturing.
News of the bill continued to boost Nvidia stock for the rest of the month, with shares popping 16% from July 15 to July 20. Although Nvidia will not directly benefit from the Chips Act, as it is a designer and not a manufacturer, the company’s CEO, Jensen Huang, has discussed the possibility of partnering with companies like Intel to mitigate supply chain disruptions. The move would help safeguard the business and put Nvidia in a close relationship with a company that would definitely benefit from the expected legislation.
July was a roller coaster for Nividia, as analysts attempted to predict how the company will fare in its coming earnings report. The stock fell 4.1% on July 22, as investors realized the Chips Act wouldn’t boost the company as much as previously hoped.
Conversely, Nvidia’s prior earnings could signify a better quarterly report than analysts would have you believe. The company’s 2023 first quarter ended on May 1, with Nvidia reporting a 46% rise in revenue, up a record $8.29 billion from the quarter before. In addition, the company is gearing up for its Sept. 19-22 GPU Technology Conference, where the next generation of high-end graphics cards is expected to be announced. The highly anticipated and long-awaited products could increase demand, providing a boost for Nvidia.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel and Nvidia. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy.
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