For Nvidia's shareholders, the past six weeks have been extremely agonizing. Firstly, a historic drop caused the company's market value to plummet from a record high, followed by several days of roller coaster like turbulence.
However, there are now signs that the worst-case scenario may have passed
The stock price of this global chip giant has surged by 17% in the past four trading days, with a market value skyrocketing by nearly $424 billion - almost equivalent to a Tencent.
Nvidia's rebound also strongly propelled the US stock market higher. Data shows that Nvidia contributed about 22% to the rise of the S&P 500 index during the same period, more than twice the contribution of any other single stock.
Ivana Delevska, founder and Chief Investment Officer of Spear Invest, stated that during this earnings season, there have been many favorable news for Nvidia among the super large enterprises. However, the impact of closing arbitrage trades recently was too significant to have much effect on Nvidia's stock price.
And now, the technological selling pressure has weakened, and the fundamental narrative has returned, which is why we see Nvidia soar, "Delevska pointed out.
Undoubtedly, Nvidia's rapid rebound has caught option traders off guard who have been betting that the chip manufacturer will suffer more losses.
According to industry compiled data, the gap between the protection cost of Nvidia's 10% decline over the next 60 days and the protection cost of contracts betting on its 10% increase has reached its highest level since May 2023.
Investors build positions before financial reports are released?
Of course, for a stock that has risen more than 1000% in the past 15 months and then quickly lost a quarter of its gains, the 17% increase in the past four days can only be considered a "minor difference" and cannot completely eliminate all the concerns that have led to the recent sharp decline - for example, some investors may still be concerned about the health of the US economy; Is it wise for technology companies to invest hundreds of billions of dollars in the field of artificial intelligence in the coming years with little return on investment.
But at least for now, the sharp decline in the past few weeks has attracted a large number of investors who plan to buy on dips.
From hedge funds to retail investors, many industry insiders are still generally optimistic about the long-term development trajectory of artificial intelligence and are trying to build positions ahead of Nvidia's financial report at the end of this month. Nvidia will release its second quarter performance report for the fiscal year 2025 after the stock market closes on August 28, 2024 local time.
So far, tech giants' financial reports have generally shown that some of Nvidia's biggest clients - Microsoft, Amazon, Google, and Meta - still plan to invest billions of dollars in artificial intelligence infrastructure.
At the same time, this sharp decline has also lowered Nvidia's valuation indicators to a level that may be more attractive to investors. According to industry estimates, Nvidia's forward P/E ratio is currently about 36 times, much lower than about 44 times in June. Overall, the average forward price to earnings ratio of the Nasdaq 100 index is about 25 times.
Delevska pointed out that "even if you expect Nvidia to face competition in the future, the current valuation doesn't look expensive," adding that her preferred Nvidia valuation metric is currently close to its lowest point in seven years.
In fact, investors on Tuesday also showed strong buying interest in other semiconductor companies that have recently suffered setbacks. Broadcom's stock price rose 5.1% overnight, contributing only to Nvidia's daily increase in the Nasdaq 100 index. The stock prices of Applied Materials, AMD, and Qualcomm also generally rose on Tuesday.