Why Nvidia Stock Defied Market Drop Tuesday Morning

What happened

Shares of Nvidia (NVDA 1.09%) jumped higher on Tuesday morning, jumping as high as 4.2%. As of 2:07 p.m. ET, the stock was still up 1%, even as all three major indexes lost ground.

The catalyst that propelled the semiconductor specialist to the top was news that well-known growth investor Cathie Wood was increasing her stake – Again.

So what

Nvidia’s shares have been dumped recently, under pressure from a combination of slowing sales of graphics processing units (GPUs) used by gamers and new restrictions imposed by the US government on data centers. and cloud computing chips sold to customers in China.

Cathie Wood, the founder and CEO of Ark Invest, took advantage of the decline by buying back Nvidia shares at a brisk pace. On Monday, in fact, Wood made one of his biggest purchases so far this month, buying nearly 186,000 Nvidia shares worth $22.7 million.

That’s not all. Since the start of September, the various funds managed by Wood have added more than 588,000 Nvidia shares, which is a core holding in five of the six flagship exchange-traded funds managed by Wood. These latest purchases bring Ark’s stake in Nvidia to 1.25 million shares worth nearly $154 million.

Now what

Investors are understandably concerned about Nvidia stock, which is currently down about 63% from its peak at the end of last year. The combination of the tech-driven sell-off and the ongoing bear market has spooked some investors, especially those with short-term prospects.

Stepping back, however, reveals a business that was going full steam ahead before the economy turned south. For fiscal year 2022 (ended Jan. 30), Nvidia grew revenue to a record $26.9 billion, up 61% year-over-year, driving profit per record share of $3.85, up 123%.

This shows that underlying activity is solid and will come back strong once macroeconomic conditions improve. It should be noted that despite the decline in share price, Nvidia shares are currently trading at around 10x next year’s sales. While it may seem expensive, it’s the cheapest Nvidia stock in years. For those with a long-term view and the resources, buying now will seem like a brilliant decision five to ten years from now.