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Why NVIDIA Stock Fell Sharply on Tuesday

What happened

Shares of graphics-chip maker NVIDIA (NASDAQ: NVDA) traded as much as 7.4% lower on Tuesday. As of about 3:25 p.m. EST, the stock was down by 5.8%.

That decline came as many tech stocks were pulling back sharply. Growth stocks like NVIDIA are getting hit particularly hard, extending a sell-off that began Monday after news broke of strong interim results from a phase 3 COVID-19 vaccine trial. Broadly speaking, tech sector stocks have benefited amid the stay-at-home environment necessitated by the pandemic.

Image source: Getty Images.

So what

NVIDIA is still up by about 64% over the last six months, even factoring in Tuesday's sell-off. So it's not surprising to see shares taking a breather as many other tech stocks pull back.

Reflecting that bearishness about tech stocks, the tech-heavy Nasdaq Composite was down by 1.2% at the time of this writing on Tuesday.

Interestingly, NVIDIA stock's decline followed the arrival of positive news: Hyundai Motor has selected the NVIDIA DRIVE platform for future Hyundai, Kia, and Genesis models' infotainment systems.

Now what

Amid all this volatility, investors should remain focused on NVIDIA's underlying business.

The company's revenue grew 50% year over year in its most recently reported quarter. Further, CEO Jensen Huang seemed confident about the company's momentum at the time. "Despite the pandemic's impact on our professional visualization and automotive platforms, we are well positioned to grow, as gaming, AI, cloud computing and autonomous machines drive the next industrial revolution around the world," he said in the second-quarter earnings release delivered in August.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends NVIDIA. The Motley Fool has a disclosure policy.


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