NVIDIA tanked 10% this week, here's what to do about it
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Disclaimer: D J Thomas has positions in stocks mentioned in this article
Wondering if you should’ve sold your NVIDIA (NASDAQ: NVDA) position, or at least trimmed it after reading the headlines this week?
Then you’ll love my all-time favourite investing strategy.
It’s called “do nothing” and it’s one I’ve stolen from Terry Smith, founder and chief executive of Fundsmith.
I’ve read much of what Terry Smith has written over the years and have seen him speak at in-person events.
Smith’s approach is simple, repeatable, and importantly, it beats the stock market averages.
Buy good companies. Don't overpay. Do nothing.
Terry Smith
As simplistic as this framework is, that’s the beauty of it.
Whilst indicators, lightning round-trip trades, and AI strategies are all the rage, buying good companies at a price that makes sense and holding them for the long term forces you to ignore the noise.
You make mistakes only when you stray from an investment framework.
So today we will use this week’s tech sell-off to see how doing nothing as part of your investment strategy can help you when tech stocks are falling.
Let’s take a look at this week’s market mayhem.
Why NVIDIA stock tanked 10% this week
The reason why NVIDIA stock tanked 10% this week is threefold:
Institutions want to buy the stock at a cheaper price (didn’t you know I’m a conspiracy theorist)
The massive valuations of tech stocks are sentiment-driven, not fundamentals-driven, and sentiment is turning sour (see below)
Super Micro Computer (NASDAQ: SMCI) didn't preannounce earnings like it has over the last eight quarters.
Companies preannounce earnings when results are above the market’s estimates.
Wall Street has reacted by selling off Super Micro Computer stock in the belief that its next earnings report will not beat expectations.
The market has somehow conflated Super Micro Computers’ stock with NVIDIA because SMC builds data centres using NVIDIA’s chips.
Pilane Capital’s take: the market is being absurd and has totally discounted the unprecedented demand for chips which is not going away anytime soon.
Why we’re holding onto NVIDIA and how you can profit from it
This latest sell-off in NVIDIA stock is in our view a good time to get ready to buy the stock if you haven’t already.
Alternatively, if you’d prefer to spread your risk a little more across large-cap tech, a position in the NASDAQ 100.
We do not value NVIDIA the same way the stock market does; sentiment is not a feature of our bespoke proprietary research methodology.
Old-fashioned (profitable) value investing principles applied to growth-orientated large-cap tech stocks are what we live off.
The value of NVIDIA is its global leadership position in GPUs brought about by its CEO, Jensen Huang.
The AI arms race has helped to cement NVIDIA’s position as the world’s best chip maker.
We’re holding.
1. Stock investors: access our global large-cap tech holdings. This well-constructed portfolio takes advantage of technological innovation and backs global visionary leaders pushing the frontiers of what is possible.
2. Angel investors: join highly experienced investors in my flagship investor community - the Pilane Capital Angel Syndicate and access thesis-aligned deal flow.
3. Founders: submit your start-up to our founder-investor matching service and our network of experienced angel investors. Pre-seed to seed-stage tech founders domiciled in the UK or EU.