News directly related to Nvidia (NASDAQ:NVDA), as well as market-related factors, keep putting pressure on NVDA stock. Hitting a new 52-week low earlier this month, shares in the chip maker could continue to struggle in the near term.
With this, you may be wondering what lies ahead. Will it make a major comeback in 2023? Will it experience a multi-year slump, like it did in the late 2010s?
It all depends on two things. First, the speed at which the Federal Reserve eases its recent monetary tightening efforts. Second, whether or not the global economy experiences a severe recession, a mild recession, or no recession at all in the coming year.
While this uncertainty may make it difficult to make this a short-term trade, this may work in your favor if you invest with a long time horizon. Why? Let’s dive in, and find out.
Why NVDA Stock Keeps Tumbling
Tech stocks overall remain under pressure, and not just due to the Fed’s plans to continue hiking rates to combat inflation. Concerns about the impact on operating performance by factors like a stronger dollar and a slowing global economy are also applying pressure to the sector overall.
Also, as mentioned above, company-related news is also negatively affecting the performance of NVDA stock. One bit of news hurting shares lately has been the U.S. government’s new export restrictions. These apply to some of the high-end AI products it currently sells to end-users in China.
That’s not to say they haven’t been any bright spots.
For instance, the U.S. Department of Commerce this month is now seeking applications for the subsidies authorized by last month’s CHIPS Act.
While as a fabless chip company, Nvidia can’t benefit from manufacturing subsidies, it may qualify for some of the research and development (R&D) funding provided by this program. It may also receive some indirect benefits from this large slug of federal largesse.
Still, outside small positives like this one, things stand to remain negative for the company, and for the stock, in the short term.
It Could Take a Year (or Longer) for Nvidia to Recover
When it comes to a NVDA comeback, it’s more a matter of “when” than “if.” Given its leading position in the GPU market and exposure to secular trends like the rise of AI and cloud computing, the company will continue the deliver the results needed to justify a rebound for shares.
This “when” may arrive within a year’s time. Assuming the Fed’s rate hikes achieve their intended goal (lower inflation), enabling the central bank to resume lowering rates, before they have a severe impact on employment and economic growth.
On the other hand, it may take more than a year for the situation to improve. If high inflation persists, the Fed may be forced to raise rates further.
This may result in “doom and gloom” predictions of a severe recession ahead panning out. In turn, affecting Nvidia’s growth, and delaying a possible re-acceleration of growth.
Put simply, if you’re expecting Nvidia to bounce back within a matter of months, don’t hold your breath. However, in the case of long-term investors, don’t assume avoiding this stock completely is the best move.
The Verdict on NVDA Stock
If Nvidia is currently a position in your portfolio, now’s not the time to exit your position. While it currently earns a C rating in my Portfolio Grader, a rebound, even if it takes some time to happen, will eventually play out.
For those who do not own it right now, the decision to buy depends on your time horizon. Those looking at it as a possible short-term play could end up disappointed, considering current trends.
But if you have a longer time horizon, the opportunity to pick up on weakness could arise. While you may not want to buy it immediately, you may want to keep it on your watchlist, in case market volatility results in a “can’t miss” entry point opening up.
Trends may be working out of its favor now, yet that isn’t going to be the case forever. NVDA stock will ride out this rough patch.
On the date of publication, Louis Navellier had a long position in NVDA. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.