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Why Nvidia Stock Popped Today

The Motley Fool
The Motley Fool
 2022-01-28

What happened

Volatile Nvidia (NASDAQ: NVDA) stock, which has suffered through more down days than up days so far this year, is having a rare green day on Friday, as shares of the semiconductor giant inch up 2.1% as of 12:10 p.m. ET.

What's moving Nvidia stock higher today? At least a couple of things, I imagine.

https://img.particlenews.com/image.php?url=49Yf51_0dydDdI900

Image source: Getty Images.

So what

First and foremost, at a recent P/E ratio of 70, Nvidia stock -- while far from cheap -- nonetheless costs a whole lot less than it did as recently as just late last year, when shares of the graphics chips specialist were regularly changing hands for 90 times earnings and up. Viewed in the context of those prices, even 70 times earnings actually kind of looks like a bargain .

At the same time, investors in Nvidia still have a few weeks to wait before Nvidia delivers its next batch of earnings news on Feb. 16. In the meantime, investors may be parsing the latest earnings news from other stocks in the semiconductor space for clues to Nvidia's own future.

Now what

And what are those other stocks saying? Just this week, computer memory maker Seagate boasted of having an "outstanding year" in 2021 and predicted that 2022 would be even better given "favorable demand trends" in the computing space.

Seagate rival Western Digital echoed sentiments about 2021 being better than expected, and said computer memory demand remains strong "across our end markets" in 2022 (a fact that's only hurting Western Digital's business because of "supply chain disruptions"). And Intel , while roundly criticized for warning of weak gross margin and weaker profits in the coming quarter, nonetheless guided higher on revenue than analysts were expecting -- indicating that demand is still strong for semiconductors.

Even better (for Nvidia), in a note commenting on Intel's news yesterday, TheFly.com noted that Intel was "still losing share." The logical implication of that is that someone else -- someone perhaps named Nvidia -- is probably gaining share. And that right there sounds to me like a good reason for optimism about Nvidia.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Intel and Nvidia. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy .

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