Nvidia Stock News: NVDA launches to new all-time high after Recursion deal
- NVDA advanced 3.5% on Wednesday.
- Nvidia invested in biotech firm Recursion that uses AI technology.
- NASDAQ 100 rebalancing will cause major selling of NVDA stock.
- June CPI is clearly bullish for NVDA and the general market.
- Nvidia stock reaches new all-time high in Thursday premarket.
Nvidia (NVDA) stock added more than 2% in Thursday’s morning session to $449.93 – a new all-time high – although the advance had sagged a bit by the time of writing. Wednesday’s lower inflation results have made the market as a whole more optimistic, and after that news NVDA stock locked in a 3.5% gain on the day.
Nvidia’s investment in Recursion has also excited investors as it appears to be a newer utilization of artificial intelligence (AI) on Nvidia’s platform. Additionally, SoftBank has courted Nvidia to become an anchor investor in the coming Arm IPO. Nvidia attempted to acquire Arm two years ago. The NASDAQ Composite has increased by 1% in the first half-hour of trading.
Nvidia stock news: Recursion investment excites, but NASDAQ 100 rebalance spells selling pressure
Nvidia announced an interesting $50 million investment in biotech firm Recursion Pharmaceuticals (RXRX) on Wednesday. The company will utilize Nvidia’s AI-primed cloud platform to train new AI models for drug discovery. Recursion has 23 petabytes of data sets involving biology and chemistry. The firm already debuted the BioNeMo platform earlier this year that uses generative AI technology to study possible drug creations.
Recursion stock soared more than 78% on the news of the investment, which was structured as a private investment in public equity (or PIPE) deal.
The flipside of the current scenario for Nvidia stock is that the leadership behind the NASDAQ 100 has announced that it will rebalance its index in order to reduce its reliance on the Magnificent Seven stocks. These are Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL), Tesla (TSLA), Meta Platforms (META) and, of course, Nvidia.
Due to the extreme outperformance of these stock in the first half of 2023, they now take up between 48% and 55% of the index weighting. Though details of the rebalancing will not be announced until this Friday, Wells Fargo believes these seven will be reduced to a 40% combined weighting.
Nvidia currently makes up 7.04% of the NASDAQ 100, and reducing its weighting in one of the most popular indices will mean that many passive index fund managers will need to sell off a large amount of NVDA stock in a short period of time. The new rebalancing will go into effect during the July 24 session in less than two weeks.
Curtailed inflation still positive news
The Bureau of Labor Statistics released the Consumer Price Index (CPI) for June on Wednesday morning. The fact that YoY core inflation dropped from 5.3% in May to 4.8% in June delighted growth stock investors especially, as well as the broad market. Slowing inflation means the Federal Reserve is less likely to raise interest rates in the future and might be more quick to cut rates earlier than expected.
Still, the vast majority of observers think the central bank will raise interest rates by 25 basis points at its meeting on July 26, but there is less consensus about future hikes.
“We do not have strong conviction on what the Fed is likely to do in September and beyond,” wrote economist Thomas Simons of Jefferies on Wednesday.
Semiconductor stocks FAQs
A semiconductor is a term for various types of computer chips. Officially called semiconductor devices, these computer chips rely on semiconductor materials like silicon and gallium arsenide to process the electrical current that produces the modern world of computing. They come in many shapes, sizes, enhancements and configurations such as diodes, transistors and integrated circuits to more complicated applications like DRAM memory, simple processors and even GPUs.
First, there are the pure chip designers, such as Nvidia, AMD, Broadcom and Qualcomm. These companies use sophisticated software to design and test chips. Second, there are the equipment manufacturers that provide the machines necessary to build computer chips. These include ASML and Lam Research. Then, there are foundries that manufacture the chips. These include Taiwan Semiconductor and GlobalFoundries. Last of all are the integrated device manufacturers who design their own chips and additionally manufacture themselves. These include Samsung and Intel.
It is the observation that the number of transistors in an integrated circuit doubles every two years. The “law” is named after Gordon Moore, who founded Fairchild Semiconductor and later Intel. The doubling is possible due to the shrinking size of process nodes or parts in the computer chip. In 1971 the advanced commercial manufacturing had reached 10 microns in width. In 1987 semiconductor technology had advanced to 800 nanometers in width. By 1999, this process had moved to 180 nanometers. By 2007, the size had dropped to 32 nanometers, and this fell all the way to 3 nanometers in 2022, which is close to the size of human DNA.
In 2022, the global semiconductor industry had revenues just under $600 billion. In total, the industry shipped 1.15 trillion semiconductor units in 2021. The leading nations involved in the semiconductor supply chain are Taiwan, the United States, China, the Netherlands, South Korea, Japan and Israel.
Nvidia stock forecast: All-time highs but warning signs of a downturn
NVDA stock is back at an all-time high, but there are some poor aspects of the chart. The Moving Average Convergence Divergence (MACD) indicator is clearly in a downtrend, and the 9-day moving average looks prepared to fall back below its 21-day counterpart. Nearby support rests at $400 and $420.
NVDA daily chart