What happened
Shares of semiconductor giant Nvidia (NVDA +4.30%) jumped more than 2% in morning trading Monday...then gave it all back in the afternoon...then did yet another U-turn, finally ending the day up 2.5%.
That's a lot of volatility for a pretty slow news day.
Image source: Getty Images.
So what
What's got investors feeling uncertain about the direction Nvidia's heading today? A couple of factors seem to be operating at crosscurrents. On the one hand, interest rates are heading higher, with the yield on the 10-year U.S. Treasury note rising past 2.8% to its highest yield in four years.
And granted, "2.8%" may not sound like a lot of money relative to the more than 38% that Nvidia stock is up over the past 52 weeks. But interest on Treasury bonds is the closest thing you'll find to a risk-free investment in this market, and the higher bond yields go, the less interested investors will be in investing money in volatile tech stocks like Nvidia, which can lose money even faster than they gain money.
(Hint: Although up 38% over the last 52 weeks, Nvidia stock is also down 34% over the last five months).
Now what
On the other hand, though, investors also have to read the tea leaves from Taiwan Semiconductor Manufacturing Company's (TSM +5.08%) earnings report late last week, which showed the company thrashing earnings estimates with a $1.40 per-share quarterly profit -- and better-than-expected sales as well.
As a contract manufacturer for major semiconductor clients that include Nvidia itself, TSMC is something of a bellwether for the chips industry, and if business is going well for TSMC in April, then this probably bodes well for Nvidia's own quarterly earnings report, which is due out next month.
One note of caution, though, before you join the stampede of Nvidia stock buyers: TSMC warned that its second-quarter sales might come in a bit short of what analysts have been forecasting. That cautious forecast kept the lid on stock price gains at TSMC last week. A similar forecast could have the same effect on Nvidia stock next month.
