What happened
Shares of Nvidia (NVDA +0.77%) were up 3.5% today as of 11:15 a.m. ET. That now marks a more than 10% rebound in the last five trading days as investors weigh data from the company's recent earnings report and financial guidance for the second quarter -- which is calling for "only" 24% year-over-year sales growth at the midpoint of expectations.
Much of this slowdown is due to a $500 million impact from cessation of sales to Russia and supply disruptions in China because of pandemic lockdowns.
The real reason the stock is up today, though, is likely because growth investor Cathie Wood went shopping and added Nvidia to her cart.
Image source: Getty Images.
So what
Cathie Wood's ARK Invest revealed that it purchased over 245,000 shares of Nvidia on Thursday across three exchange-traded funds (ETFs): the ARK Innovation ETF (ARKK +1.20%) (over 191,000 shares), ARK Next Generation Internet ETF (ARKW +0.56%) (over 33,500 shares), and ARK Fintech Innovation ETF (ARKF 0.18%) (nearly 20,500 shares).
Additionally, Evercore (EVR +1.41%) stock analyst C.J. Muse reiterated his buy rating for Nvidia on Thursday and maintained a price target of $300. If correct, that implies about 63% upside from the current share price.
Now what
It's nice to see some big investors wade back into stocks after the drubbing the market has endured this year. But let's focus on Nvidia the business for a moment rather than the stock.
Notably, CEO Jensen Huang and chief financial officer Colette Kress said on the earnings call this week that the company's largest end-market -- data centers -- could notch quarterly consecutive growth for the remainder of the year. Artificial intelligence has reached a point where it is both useful enough and affordable enough for all industries in the economy to put it to use, and Nvidia is a key player powering that movement.
The video game segment is a bit more of a wild card. After a couple of years of boomtimes, consumer spending is slowing. Kress also said it is hard to quantify just how much the cryptocurrency industry is affecting gaming-chip sales, and Ethereum's (ETH 4.38%) switch to a proof-of-stake model this summer could further dampen demand for Nvidia GPUs.
The company is also going to announce new chips later this year, so many video game enthusiasts might be delaying a purchase until new models arrive.
At any rate, while Nvidia's immediate-term outlook is far slower than it has been the last few years, this semiconductor leader's long-term prospects are by no means diminished. At about 58 times trailing-12-month free cash flow, this stock is for investors who plan to hold for at least a few years (but the more the better). If that's your plan, then this week's earnings report had few surprises in it. Nvidia is still on a roll.
