So much for my feeling on Monday that a 7% drop in Nvidia (NVDA) after the company’s August 28 earnings report was about as big a dip as investors would get and that it was time to buy Nvidia shares.
The stock dropped another 9.5% on Tuesday. I’d sure like to have bought after the drop rather than before. But I’l stand by my recommendation that you want to own Nvidia shares before the ramp in revenue from its Blackwell chip upgrade hits the books at the company in the first or second quarters of calendar 2025.
What happened today to drive the stock lower?
Well, as my Aunt Sallie always says, Nothing good happens to a stock price when the Justice Department announces it’s ramping up an anti-trust investigation. Especially if the stock is in a sector already making investors nervous.
Yesterday the DOJ sent subpoenas to Nvidia Corp. and other companies seeking evidence that the chipmaker violated antitrust laws. The DOJ, which had previously delivered questionnaires to companies, is now sending legally binding subpoenas that require recipients to provide information. That takes the government a step closer to launching a formal complaint.
The focus of the inquiry has been on how Nvidia attempts to convince companies to use its products. The DOJ has been investigating Nvidia’s acquisition of RunAI, a company that makes software for managing AI computing. Regulators also are inquiring whether Nvidia gives preferential supply and pricing to customers who use its technology exclusively or buy complete systems.
I’d note the even were the DOJ to prove its case some years down the road from now the likely remedy would be an agreement to change pricing and sales practices and, perhaps, a reversal of the RunAI deal.
And not, given what we know know, a breakup of the company of the sort being imagined by some investors in the legal case against Alphabet (GOOG).
But the DOJ news hit the stock market on what was already a bad day for semiconductor stocks. The big tech heavy Nasdaq 100 lost more than 3%. The VanEck Semiconductor ETF saw its biggest plunge since March 2020. Shares of Advanced Micro Devices (AMD) lost 7.82%. Micron Technology (MU) tumbled 7.96%. Intel (INTC) gave up 8.80%.
