Nvidia gets 2018 flashbacks as chip demand craters and problems pile on

Nvidia is the most valuable U.S. semiconductor company. Their chips power nearly all digital devices like PCs, cars and phones.

From 2020 to its 2021 peak, massive chip demand led to $NVDA rising over 400% — before cratering 56% this year.

They’ve been here before. The chart above (grey line) shows Nvidia’s stock price change between 2017 and 2019. Then the crypto market burst, and along with it, Nvidia’s chip demand.

And 2022 just hasn’t been their year….

• Slowdown in global chip demand — including a weak demand from crypto miners.
• The U.S. restricting sales of some of Nvidia’s products to China and Russia.
• Nvidia terminated its deal to acquire ARM for $40B over approval issues from regulators.

In August, Nvidia reported weak sales, gave a disappointing forecast, and struggled with too much graphic card inventory on the new and used markets. Ethereum’s transition to proof-of-stake also made high computing graphic cards useless for $ETH miners.

Last week, Nvidia announced a new gaming chip that uses AI to make images more realistic — hoping to give buyers a reason to upgrade their graphic cards.

All semiconductors are feeling the pain. With the world slowing down, semiconductor stocks — which are highly sensitive to the global economy — have fallen hard. The iShares Semiconductor ETF (NASDAQ:SOXX) — a basket of 30 semiconductor stocks — is down 38% this year.

Will Nvidia bounce back? Analysts have high hopes. But like other high-growth tech stocks — the market is dictating their move. If you liked Nvidia when it was trading at over $300 with a 70x price-to-earnings (P/E) multiple, you’ll love it trading at $127 with a 36x P/E ratio.