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Why Nvidia Stock Slipped Lower Today

By Rich Smith – Dec 8, 2021 at 5:26AM

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Traders gonna trade.

What happened

Shares of semiconductor specialist Nvidia (NVDA 2.73%) opened lower on Wednesday, and were still down 2% as of 10 a.m. ET. The good news, though, is that there isn't any bad news behind the decline.

This looks like a simple case of traders taking profits.

Green up arrow button and red down arrow button.

Image source: Getty Images.

So what

As MarketWatch pointed out this morning, Tuesday saw a rally across stock markets -- but few sectors benefited as much as semiconductors, which "led the way, with gains far outpacing the broader market." Indeed, the PHLX Semiconductor Index (SOXX 2.73%) posted a 5% gain yesterday, or more than triple the 1.4% gain on the Dow Jones Industrial Average.  

Nvidia shares performed even better -- up 8%.

Now what

Does that sound like good news to you? It is, except for just one thing: Casting about for a reason why semiconductor stocks were up yesterday, the best MarketWatch's reporters could come up with was the observation that "investors apparently got over their fears of the latest coronavirus variant."

Unfortunately though, if there wasn't any particular reason for Nvidia shares to rise yesterday, then -- absent good news today -- there's no particular reason why those same Nvidia shares should retain their gains today. The logical conclusion, then, is that traders are selling Nvidia Wednesday in order to cash out some of their windfall winnings from yesterday.

When you consider further that peer semiconductor makers such as Advanced Micro Devices and Intel -- both also up yesterday -- are giving back some of their gains today, too, I suspect this logical answer is also the right one.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Advanced Micro Devices, 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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