Something is spooking Nvidia (NVDA +5.93%) investors today. Shares dropped almost 5% in early trading and were still lower by 2.7% as of 1:10 p.m. ET.
It's actually more than one thing putting pressure on Nvidia shares. First, investors got a business update from server manufacturer Super Micro Computer last night, where the artificial intelligence (AI) player slashed its guidance. Then one Wall Street analyst piled on the fear with a "sell" recommendation on Nvidia. That was based on some of the same concerns impacting Super Micro's business.
Data center spending is the billion-dollar question
Super Micro preannounced its fiscal 2025 third-quarter results for the period ended March 31. It cut its quarterly revenue estimate by nearly $1 billion to about $4.55 billion. The maker of AI servers and cooling systems said some customers delayed investment decisions and expects those sales to move to the current quarter.
Investors are wondering if some of those delays might speak more to an environment where big AI cloud infrastructure companies are cutting back on data center investments. If so, that could hit Nvidia sales in a big way.
NASDAQ: NVDA
Key Data Points
Nvidia shares have been under pressure all year, partly from uncertainty and concerns for slowing sales growth. It will be almost another month before investors hear directly from Nvidia, since it reports quarterly results on May 28. One Wall Street analyst doesn't think investors should wait for that.
Seaport Research analyst Jay Goldberg put a $100 price target on Nvidia shares today, representing a 5% drop from recent levels. The analyst feels that gains from AI spending are already priced into Nvidia shares, and that growing questions surrounding future spending on AI infrastructure also will pressure the stock. He believes investors should sell shares now.
I believe long-term investors should hold Nvidia stock. Super Micro's problems could be internal or due to rising competition in its niche market. Even if data center spending is slowing, Nvidia can easily withstand a slowdown in the short term. Therefore, the stock remains a buy-and-hold name, in my view.
