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Why Nvidia Stock Dropped Again Today

By Rich Smith – Dec 16, 2021 at 9:13AM

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J.P. Morgan left it off a list of top picks for next year.

What happened

For five long days, it looked like the stock of Nvidia (NVDA 1.44%) could do no right, falling steadily day after day. But yesterday, analysts at KeyBanc threw it a lifeline.

KeyBanc noted strong demand for cloud computing services and that sales of Nvidia's semiconductors (which help with cloud computing) seemed to participate in that growth. That caused Nvidia shares to break their five-day losing streak on Wednesday, closing the day 7.5% higher.

But today, the stock is giving back nearly all its gains, and as of 12:45 p.m. ET, it was down 6.1%.

White arrow declining sharply atop a stock tickertape display bathed in red.

Image source: Getty Images.

So what

Today it's back to the same old story for Nvidia: Analysts are optimistic that the global semiconductor shortage will continue into 2022, and that it will be good news for semiconductor stocks in general. But they still think Nvidia is not the best way to play this trend.

Today, it was J.P. Morgan dissing Nvidia, reported. J.P. Morgan is encouraging investors to look to semiconductor stocks like Broadcom (AVGO 1.23%), Marvell Technology (MRVL 0.12%), and KLA (KLAC 0.79%) as better bets to play the tight supply chain in the semiconductor industry.  

Now what

Broadcom, Marvell, and KLA made J.P. Morgan's list of "top picks heading into 2022," TheFly said, but Nvidia stock was notably absent from this list. That's not a reason to discount Nvidia entirely, because it's not entirely without catalysts. Just today, for example, Nvidia announced that it will give an address at the Consumer Electronics Show on Jan. 4, promising to "present [its] latest breakthroughs in accelerated computing -- from design and simulation to gaming to autonomous vehicles."  

Something like that might move the needle on Nvidia stock. But the higher this stock's valuation goes, the bigger the news needs to be to move that needle.

With the stock still trading above 93 times earnings despite its recent price weakness, I have to agree with the analysts that companies like KLA, at 22 times earnings; Marvell (23 times earnings), and even Broadcom (at 47) look like better picks for bargain hunters.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Nvidia. The Motley Fool recommends Broadcom Ltd and Marvell Technology Group. The Motley Fool has a disclosure policy.

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