Please ensure Javascript is enabled for purposes of website accessibility

Why Nvidia Stock Surged 23% in October

By Beth McKenna – Nov 2, 2021 at 10:53PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

In 2021, shares of the gaming and tech giant have returned a whopping 102%.

What happened

Shares of tech giant Nvidia (NVDA 3.66%) jumped 23.4% in October, according to data from S&P Global Market Intelligence. Catalysts include the market's overall strength and news from Meta -- social media giant Facebook's (META 23.28%) new corporate name -- that investors viewed as a positive for Nvidia.

In 2021, Nvidia stock is on fire. Through Nov. 2, the large-cap tech stock has returned 102%, compared to the S&P 500 index's 24.7% return.

Server racks in a data center.

Image source: Getty Images.

So what

Nvidia stock moved steadily upward throughout October, with the sharpest rise coming in the last week of the month. The market's strength provided a tailwind, especially to tech stocks. In October, the S&P 500 rose 6.9% and the tech-heavy Nasdaq popped 7.3%.

The second catalyst was news from Meta, then named Facebook, in its third-quarter earnings release. In its Oct. 25 release, the social media leader said it planned to significantly increase its capital spending next year. In 2022, it expects capital expenditures in the range of $29 billion to $34 billion, compared to about $19 billion this year. The company indicates this big ramp-up in spending will be "driven by our investments in data centers, servers, network infrastructure, and office facilities."

Investors in Nvidia loved this news, driving shares up nearly 7% the next day and more than 11% for the week. Nvidia is the leader in providing graphics processing units (GPUs) for various data center applications, including powering artificial intelligence, a tech that's in extensive use by social media platforms. So, it makes great sense that investors believe that Nvidia will see a boost in its business from Meta's huge increase in spending.

There's another factor at play here, too: the metaverse. Meta also said in its earnings release that it's "dedicating significant resources toward our augmented and virtual reality products and services, which are an important part of our work to develop the next generation of online social experiences." This is a reference to the metaverse, which Merriam-Webster defines as a "highly immersive virtual world where people gather to socialize, play, and work."

Nvidia could benefit from Meta's focus on the metaverse, thanks to its recently launched Omniverse, which Nvidia has described as "the 'plumbing' on which metaverses can be built."

Now what

Material news should be coming soon. Nvidia is scheduled to report its fiscal third-quarter results on Wednesday, Nov. 17, after the market close.

For this quarter, management has guided for revenue of $6.80 billion, representing growth of 44% year over year. It also guided (albeit indirectly, by providing several inputs) for adjusted earnings per share of $1.10, representing growth of 51%.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Beth McKenna owns shares of Nvidia but has no other position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Meta Platforms, Inc. and Nvidia. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.