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The Curious Reason Nvidia Stock Popped Today

By Danny Vena – Aug 10, 2022 at 8:22PM

Key Points

  • While other companies are cutting staff, Nvidia is handing out raises.
  • The company plans to target waste and become leaner.

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Nvidia has a unique plan to address its recent shortfall.

What happened

After going through a rough patch, shares of Nvidia (NVDA -3.54%) finally turned higher on Wednesday, gaining as much as 6%. When the market closed, shares were still up 5.9%.

There's little doubt that the overall bullish market trend helped fuel its rise, but a curious catalyst appears to have helped boost shares: The semiconductor giant assured employees that it wasn't making any sweeping cuts in the wake of its difficult quarter.

So what

The economic uncertainty that has gripped corporations everywhere has resulted in a rash of slowed hiring, job cuts, and layoffs. Reports of slashed head counts have generally been followed by a declining stock price for the companies in question, as they're viewed as harbingers of pain to come. Not so for Nvidia.

CEO Jensen Huang has sought to address the concerns of Nvidia workers. In what is purported to be a leaked company email, its chief executive assured employees that even though its second-quarter results were "significantly lower than anticipated," the company has no plans to discharge staff, according to Business Insider.

"So what does this mean for us? Do we have a layoff? No. Instead, we have given raises to take care of your families as all of you are facing sky-high inflation," Huang wrote. "We will find and eliminate all wasted time, process, and material." He encouraged employees: "Take this opportunity to make Nvidia even faster, leaner, and agile."

Now what

This report comes on the heels of disappointing preliminary financial results released by the semiconductor specialist earlier this week.

Nvidia said its second-quarter revenue of roughly $6.7 billion, while up 3%, would fall far short of the $8.1 billion it guided for just three months ago. Management noted that the shortfall was primarily the result of weaker-than-expected revenue in its gaming segment, which is now expected to generate $2.04 billion, down 33% year over year.

The company said weak channel partner sales were likely the result of "macroeconomic headwinds." The issue was further exacerbated by discounts meant to clear excess inventory.

Consumers have faced record-high inflation in recent months, so it isn't particularly surprising that chip sales might suffer. However, given the transitory nature of the issue, I think Nvidia stock is still a buy.

Danny Vena has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

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