What happened

Down Thursday, up Friday, down Monday -- seesawing semiconductor stock Nvidia (NVDA 0.35%) played true to form on Tuesday, rising once again, and this time by a pretty significant number, closing the day up 5.3%.

Curiously, however, the news wasn't all good for Nvidia today.

Glowing semiconductor chip.

Image source: Getty Images.

So what

Tuesday did start off well for Nvidia stock, with investment bank Piper Sandler saying it is "moving to a more positive stance" on semiconductor stocks in general, after making some pessimistic comments about the sector two weeks ago.

On the one hand, rumblings of weakness in PC sales and worries over whether GPU demand can hold up in the context of a crypto sell-off, combined with more general concerns about rising interest rates and inflation, have investors feeling nervous about semiconductor growth estimates. On the other hand, this caution is now already "mostly priced into stocks at current level," explains TheFly.com in a note today discussing Piper's report.  

As a result, Nvidia stock has given up 40% of its market cap since the start of this year. (And not only Nvidia. AMD (AMD -2.94%) stock is down 32%, Qualcomm has lost 25%, and even Intel is down 15%.) This has Piper Sandler thinking that much of the risk may have been squeezed out of this sector already, and I suspect it's right about that.

Now what

That's the good news. The bad news is that, after running valuations across the semiconductor sector, Piper Sandler concluded today that only three chip stocks (including AMD but not including Nvidia) qualify as "top picks."

The other bad news is that, according to a new report from TechRadar, Piper may be right to prefer AMD over Nvidia stock. As the tech news site reports, AMD has introduced two new "Radeon DNA 2" graphics processing chips and is producing them in sufficient quantities to keep them in stock for consumers to buy -- ensuring their prices don't get inflated much past MSRP. This not only makes AMD's GPUs more competitive with Nvidia on price. It also gives AMD a greater chance of making a sale in cases where an agnostic consumer goes shopping and finds Nvidia chips out of stock, but AMD chips well supplied.

TechRadar further notes that, in general, GPU prices appear to be coming back down as the global semiconductor chip shortage of 2021 begins to fade here halfway through 2022. As supply and demand start to come back into balance, the cyclical semiconductor industry may be shifting back into a battle for market share -- and a price war. Suffice it to say that if this is how things play out, it won't be great news for Nvidia and its profit margins.

Expect the seesawing to continue.