Nvidia (NASDAQ: NVDA) stock fell by 4.5% on Tuesday. This drop is part of a bigger tech sector sell-off. The main reason is ASML’s weaker-than-expected sales forecast.
ASML is a key supplier to Nvidia. It said it expects sales between Euro 30 billion and Euro 35 billion for 2025. This is at the lower end of its previous forecast. It has raised worries about chip demand and its impact on Nvidia’s business.
Nvidia leads in the market with its advanced GPUs, especially in AI. But its stock has been very volatile. It showed big swings in 2021, 2022, and 2023. This volatility has made some question its value.
Key Takeaways
- Nvidia stock fell by 4.5% due to ASML’s weaker-than-expected sales guidance for 2025, raising concerns about global chip demand
- Nvidia’s advanced GPUs have a leading position in the AI market, but the stock has shown high volatility in recent years
- Nvidia’s current valuation, trading at around 46x consensus FY’25 earnings and 33x FY’26 earnings, is considered expensive by some analysts
- Competitors like AMD and Intel are investing heavily in AI chips to challenge Nvidia’s dominance
- Concerns about companies investing in AI primarily out of fear of missing out rather than focusing on returns could impact Nvidia’s future growth
ASML’s Weak Guidance Impact on Nvidia’s Market Performance
The semiconductor industry has seen many challenges lately. ASML Holding NV’s weak 2025 guidance is the latest issue. This has affected Nvidia Corporation’s stock price, causing it to drop.
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ASML’s Sales Forecast for 2025
ASML is key for making advanced chips. They’ve cut their 2025 sales forecast to €30 billion to €35 billion. This is down from an earlier estimate of up to €40 billion. ASML’s shares fell 16% in Amsterdam, the biggest drop since 1998.
Connection Between ASML and Nvidia’s Business
ASML’s machines are vital for Nvidia’s products. So, when ASML’s forecast was weak, Nvidia’s stock fell by 4.5%. This shows how closely these two companies work together.
Effect on Semiconductor Industry
ASML’s news has hit the whole industry hard. The Philadelphia Semiconductor Index fell by 5.3%. Other companies like Applied Materials Inc., Lam Research Corp., and KLA Corp. also saw big drops.
The chip demand recovery is slower than expected, especially outside AI. Nvidia’s drop might be too much, but the market is still worried. This is because ASML’s forecast is more influenced by Intel and Samsung than by TSMC, Nvidia’s main partner.
| Company | Stock Price Decline | Decline Timeline |
|---|---|---|
| ASML Holding NV | 16% | Biggest since June 12, 1998 |
| Nvidia Corp. | 4.5% | Following ASML’s weak guidance |
| Philadelphia Semiconductor Index | 5.3% | Due to ASML’s performance |
| Applied Materials Inc., Lam Research Corp., KLA Corp. | Worst declines | Since various years, notably from 2020 to nearly a decade |
Why Is Nvidia Stock Going Down Today?
Nvidia’s (NASDAQ: NVDA) stock has seen ups and downs lately. It fell by 3.2% after the company shared its second-quarter earnings. Despite strong numbers, like a 122% revenue increase and a 152% jump in adjusted earnings per share, several factors have led to the decline.
One big issue is ASML’s weaker-than-expected sales guidance for 2025. ASML is a key supplier in the semiconductor world. It forecasted net sales between €30 billion to €35 billion. This could affect Nvidia’s stock performance. Nvidia’s next-generation Blackwell processors may also face delays, with production ramping up in the fourth quarter, potentially slipping the release into 2025.
Another concern is Nvidia’s high valuation. The stock trades at about 46x consensus FY’25 earnings and 33x FY’26 earnings. Some see this as too high. There are also worries about easing GPU demand as the initial AI large language model training phase slows down. The economics of the AI business remain weak, with heavy investments yielding minimal revenue, raising concerns about future capital spending.
Nvidia’s data center sales have been a bright spot, growing by 154% year-over-year in the second quarter. But gaming revenue has started to slow down. This has raised questions about Nvidia’s ability to keep growing.
Despite the recent drop, Nvidia is still a leader in the semiconductor industry. It has a strong market position and a promising future in AI. Investors will watch closely to see how Nvidia handles these challenges and keeps its edge.
| Metric | Value |
|---|---|
| Nvidia Stock Price Change (After Q2 Earnings) | -3.2% |
| Nvidia Q2 Revenue | $30 billion |
| Nvidia Q2 Adjusted EPS | $0.68 per share |
| Nvidia Q2 Revenue Growth (YoY) | 122% |
| Nvidia Q2 Adjusted EPS Growth (YoY) | 152% |
| Nvidia Q2 Data Center Revenue Growth (YoY) | 154% |
| Nvidia Q3 Revenue Guidance | $32.5 billion |
| Nvidia Q3 Adjusted Gross Margin Guidance | 75% |
| Nvidia Stock Price Target 2025 | 46x consensus FY’25 earnings |
| Nvidia Stock Price Target 2026 | 33x consensus FY’26 earnings |
Competitive Pressures and Market Valuation Concerns
Nvidia is facing tough competition, especially from AMD’s new Instinct MI300X chip. This chip is said to beat Nvidia in several areas. Tech giants like Intel are also jumping into the AI chip market, making things even more competitive.
Nvidia’s stock price is high, trading at 46 times the forecasted earnings for 2025. This high price makes people worry about Nvidia’s future growth. The demand for GPUs might drop, and new competitors could make things harder.
AMD’s Competitive Position with MI300X Chip
AMD’s Instinct MI300X chip is seen as a big change in the AI chip world. It’s said to be more efficient and cost-effective than Nvidia’s current chips. This could shake up Nvidia’s lead as people look for cheaper and greener AI solutions.
Current Market Valuation Analysis
Nvidia’s stock price is high, at 46 times the forecasted earnings for 2025. This high price makes some worry about Nvidia’s future. Investors are getting more careful with tech stocks, especially with the economy uncertain.
Future Growth Challenges
Nvidia’s growth is facing many challenges. Demand for GPUs might slow down, and there’s a push for more energy-efficient tech. The competition is getting fiercer, which could slow Nvidia’s growth. Some companies might invest in AI just to keep up, not because it’s profitable.
Economic Indicators and Stock Performance
Recent economic signs have greatly affected Nvidia’s stock. The U.S. Labor Department’s jobs report showed only 142,000 new jobs in August. This was less than the expected 160,000.
Also, U.S. manufacturing production has dropped. These issues make it hard to believe in a soft landing for the economy.
These problems have led to Nvidia and other growth stocks losing value. There’s also talk of a Department of Justice antitrust probe into Nvidia. Despite Nvidia saying they haven’t gotten a subpoena, their stock fell by up to 5.1% on one day. It was still down by 4.3% by 12:52 p.m. ET.
The U.S. Department of Commerce said personal spending rose by 2.1% year over year. But, with food and energy prices removed, inflation was at 2.7%. These numbers have made investors worried, causing a market sell-off that hit Nvidia hard.
FAQs
Why is Nvidia stock going down today?
Nvidia stock fell by 4.5% on Tuesday. This is because of weak sales guidance from ASML for 2025. It also worries about global chip demand.
Concerns about AI processor sales to Persian Gulf countries and high valuation also play a role.
How does ASML’s forecast impact Nvidia’s business?
ASML expects net sales for 2025 to be between Euro 30 billion to 35 billion. This is at the lower end of previous estimates. It affects Nvidia because ASML is key for advanced chip manufacturing.
The semiconductor industry faces challenges. Slower chip demand recovery outside AI is a big issue.
What are the other reasons for Nvidia’s stock decline?
Nvidia’s stock decline is also due to its high valuation. The stock trades at 46x consensus FY’25 earnings and 33x FY’26 earnings. Some see this as too expensive.
There are also risks of easing GPU demand. The initial AI large language model training phase is slowing down. The AI business economics are weak, with heavy investments and minimal revenue.
How is Nvidia facing competitive pressures in the market?
Competition is growing in the AI chip space. AMD’s new Instinct MI300X chip claims to outperform Nvidia’s current chips. Intel is also entering with value-priced AI chips.
Nvidia’s current market valuation seems high, at 46x consensus FY’25 earnings. Future growth challenges include easing GPU demand and increasing competition.
How have economic indicators affected Nvidia’s stock performance?
Recent economic indicators have hit Nvidia’s stock. The U.S. Labor Department’s jobs report showed only 142,000 new jobs in August. This fell short of the 160,000 target.
This disappointing data, along with declining U.S. manufacturing production, worries about a soft landing in the economy. These factors have led to a sell-off in Nvidia and other growth stocks.
