Please ensure Javascript is enabled for purposes of website accessibility

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.

Motley Fool Issues Rare “All In” Buy Alert

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

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NVIDIA Corporation Stock Quote
NVIDIA Corporation
NVDA
$127.01 (-3.54%) $-4.66

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
342%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.