Nvidia shares sour after job growth gives market inflation worries

  • NASDAQ:NVDA gained 6.94% during Thursday’s trading session.
  • NVIDIA continues to see Wall Street analyst support following its earnings report.
  • AMD announces it is hosting an Analyst Day on June 9.

UPDATE: Nvidia stock is down 2.5% at $191 about 45 minutes into Friday’s down market. The Nasdaq is down 1.5%; the S&P 500, 1%; and the Dow, 0.4%. The market is doing a bit of digestion after Thursday was so tremendously bullish. What pulled the market down on Friday, including NVDA shares, was the non-farm payrolls data released by the US government. It state that instead of 328,000 net new jobs in May, the economy is estimated to have created 390,000. The reason this figure, which is good for workers, disgruntles the market is that it means that the tight labor market will likely lead to higher inflation for longer. The only good sign is that wage increase are slowly coming down. With high employment levels though, wage growth typically leads to overal inflation growth, which could lead the Federal Reserve to raise interest rates higher than expected. The central bank is already expected to raise the fed funds rate by 50 basis points in June and July. If high employment continues, and the economy remains robust, then the Fed will continue raising rates until the economy slows down. This strategy has the obvious problem that the central bank may overshoot and cause a recession. Additionally, higher interest rates tend to make growth stocks like Nvidia less appetizing compared with higher bond prices.

NASDAQ: NVDA powered higher on Thursday alongside a broader tech rally that sent all three major industries surging into the green. Shares of NVDA jumped higher by 6.94% and closed the bullish session at $195.92. Stocks snapped their two-day losing streak following the Memorial Day long weekend as investors went bargain hunting for some beaten down tech stocks. The Dow Jones saw a wild swing from being down 300 basis points early in the day, to gaining 435 basis points by the closing bell. The S&P 500 added 1.84% and the NASDAQ led the way with a 2.69% gain during the session.

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Investors certainly heeded the advice of Bank of America analyst Vivek Arya after he chose NVIDIA as his top large-cap sector stock to own. Despite softer than expected guidance from the company at least week’s call, Wall Street analysts earnings continue to show their support for the chip giant. In addition to Arya, Evercore analyst CJ Muse also reiterated his buy rating for the stock. TipRanks shows that Wall Street is overwhelmingly bullish with 27 Buy ratings and 0 Sell ratings for NVIDIA, as well as a median price target of $271.41 for the next twelve months.

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One of NVIDIA’s chief rivals, AMD (NASDAQ:AMD), announced it will be holding an Analyst Day on June 9th. These events provide an update on the business operations as well as the corporate strategy, technology, and product roadmaps. NVIDIA investors will likely be keeping a close eye on AMD’s updates, as the two companies vie for dominance in the gaming and datacenter GPU sectors. Shares of AMD were up 7.28% during Thursday’s session.

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