What happened
Shares of tech giant Nvidia (NVDA 0.30%) soared 25.4% in November, according to data from S&P Global Market Intelligence. For context, the S&P 500 and Nasdaq Composite returned 5.6% and 4.5%, respectively, last month. The latter index is the better benchmark for Nvidia because it has a heavier concentration of technology stocks.
Nvidia stock's strong performance last month is largely attributable to market dynamics. Investors bid up stocks in general and growth stocks in particular, following U.S. inflation data for October coming in better than widely expected.
NASDAQ: NVDA
Key Data Points
So what
On Nov. 10, Nvidia stock jumped 14.3% following the Bureau of Labor Statistics releasing October Consumer Price Index (CPI) data that showed inflation is cooling off. The October CPI, which measures consumer prices for a broad basket of goods and services, rose 0.4% from the prior month and 7.7% from the same month a year ago.
These numbers show inflation remains high, but they were better than the increases of 0.6% and 7.9%, respectively, that economists had expected. Moreover, they show a slight moderation of inflation from September, when the CPI rose 8.2% from the year-ago period.
Investors took the October CPI data as a sign that the Federal Reserve could soon begin to ease up on its large interest rate increases aimed at lowering inflation. High interest rates tend to suppress stock prices, and many investors are concerned that the Fed's monetary tightening policy is too aggressive and could throw the U.S. economy into a recession.
Nvidia shares continued to move upward through the remainder of the month, posting a 22.8% gain from Nov. 10. Last month, Nvidia released its third-quarter report for fiscal 2023, but this event had little effect on its stock price. Shares edged down 1.5% on Nov. 17 following the release on the prior afternoon.
In Q3, Nvidia's revenue declined 17% year over year to $5.93 billion, which beat the Wall Street consensus estimate of $5.77 billion. Adjusted for one-time items, earnings per share (EPS) dropped 50% to $0.58. That result fell short of the $0.69 analysts had been expecting.
As I wrote in my earnings article, "Given the challenging macroeconomic environment, most investors were probably satisfied with the report."
Now what
For the fiscal fourth quarter of 2023 (i.e., November 2022 to January 2023), management guided for revenue to decline 21% year over year to $6 billion. It also guided (albeit indirectly by providing a bunch of inputs) for adjusted EPS to drop 41% to $0.78.
Nvidia stock is one of the best tech stocks for long-term investors, in my view. The company is a leader in many fast-growing spaces, including artificial intelligence (AI), cloud computing, computer gaming, and autonomous vehicles.
