(Bloomberg) — Nvidia Corp. shares closed modestly lower on Tuesday, erasing an initial advance that came after Chief Executive Officer Jensen Huang gave what analysts said was an upbeat address at the company’s annual technology conference.
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The shares hit an intraday record in morning trading but ended down 0.5%. Despite that, they remain 55% above a low hit in early October, and the company is by far the best performer in the Philadelphia Stock Exchange Semiconductor Index this year. Nvidia is up about 135% in 2021, compared with a 36% gain in the industry’s benchmark index.
Analysts on Wall Street were broadly positive on the CEO’s keynote presentation.
“We find it hard to step away from the momentum,” wrote Aaron Rakers, an analyst at Wells Fargo Securities. Rosenblatt Securities was similarly emphatic, writing that “Nvidia is so, so far ahead of any chip company in virtual world dynamic it’s not even close.” Both firms raised their price targets.
The day’s initial advance resulted in the valuation briefly moving above $800 billion, though it ended with a market capitalization of about $766 billion. Nvidia is the seventh-largest member of the S&P 500, behind Meta Platforms Inc., the company formerly known as Facebook, which has a market valuation of $932.9 billion.
Some of Nvidia’s recent rally can be attributed to Meta, which last month announced a new corporate focus on the metaverse, a digital environment accessed with virtual reality tools that rely on high-powered processors. Meta is investing billions into this initiative and Nvidia is expected to be a key beneficiary.
The new focus is “right in Nvidia’s wheelhouse, and for Facebook to put its weight behind this theme is helping Nvidia a lot,” said Deepon Nag, senior research analyst for technology hardware at ClearBridge Investments.
Nvidia’s third-quarter results are scheduled to be released next week. Some have expressed concern that the stock’s move may have resulted in an elevated valuation. Shares are more than 20% above the average analyst target price, near the biggest premium ever, according to data compiled by Bloomberg.
“While the run exceeds anyone’s expectations for what you’d expect to see in such a short period of time, we’re not surprised that investors are focused more on this story,” said Matt Peron, managing director of equity research at Janus Henderson Investors. “It certainly looks fully valued in the near-term,” and amid the earnings and the conference, “there could be some disappointment, given the size of the spike we’ve just had.”
(Updates to market close.)
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