Please ensure Javascript is enabled for purposes of website accessibility

Why Nvidia Stock Dropped Again Today

By Rich Smith – Dec 20, 2021 at 2:11PM

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

Apple and Intel both figure in the decline.

What happened

Semiconductor star Nvidia (NVDA 1.39%) is tumbling along with the rest of the market this afternoon, down 2% as of 11:45 a.m. ET.

Besides the general effect of coronavirus news, there is also a report that Nvidia could face increased competition from Intel for the most-talented employees in the industry.

Simple red arrow declining stock chart on a white checked background.

Image source: Getty Images.

So what

Taiwan's DigiTimes tech newspaper today confirmed reports by Bloomberg last week that Apple (AAPL 0.96%) is hiring more semiconductor engineers in order to design more of its chips in-house. Right now, according to DigiTimes, this is more of a threat to companies like Qualcomm, Broadcom, and Skyworks Solutions, rather than Nvidia per se. It does, however, play into a broader trend of Apple bringing the design of ever more kinds of chips in-house. In the long term, that could be bad for Nvidia if it shrinks the market for graphics chips in general.

And now comes a new threat. As TechRadar reported this morning, Intel (INTC -2.33%) is moving to fight back against Nvidia's growing dominance of the chip sector, setting aside $2.4 billion in cash and stock grants with which to raise employee salaries in 2022. Across Intel's 110,000-person payroll, that works out to an average of $21,000 per person in pay boosts, TechRadar said. But the money will be targeted toward Intel's best-performing employees, in an effort, as Intel said, to "win the fierce battle for talent in today's competitive market, while strengthening our execution."

Now what

Nvidia investors seem a little spooked by Intel's move. But according to TechRadar, the bulk of the pay raises being contemplated will come in the form of stock grants. And with Intel stock up only 9% over the past year, and Nvidia stock up more than 108% -- despite recent weakness -- I suspect rational high-tech workers looking for the best chance of profiting from stock options will still gravitate to Nvidia, and shy away from Intel.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Apple, Intel, Nvidia, and Qualcomm. The Motley Fool recommends Broadcom Ltd and Skyworks Solutions and recommends the following options: long January 2023 $57.50 calls on Intel, long March 2023 $120 calls on Apple, short January 2023 $57.50 puts on Intel, and short March 2023 $130 calls on Apple. 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.