To The Moon

NVIDIA ( $NVIDIA Corp(NVDA)$ ), a pioneer in the field of artificial intelligence, has consistently faced challenges and uncertainties, particularly in the realm of export controls imposed by the U.S. government. Despite these setbacks, the company's stock has demonstrated remarkable resilience, often rebounding from initial declines. The recent news of potential further restrictions on AI chip exports to certain countries has once again sent NVIDIA's stock tumbling. However, based on historical patterns and the company's strong fundamentals, it is reasonable to anticipate a recovery.

On Tuesday, 15 October 2024, U.S. government officials discussed capping sales of advanced AI chips from the U.S. to certain countries, Bloomberg reported, citing people familiar with the matter. That could affect both Nvidia and rival chip maker Advanced Micro Devices. At this time, NVIDIA shares are down 4.3% to $132.15, and AMD ( $Advanced Micro Devices(AMD)$ ) shares are down 4.4% to $157.85.

The history of NVIDIA's stock performance following U.S. government announcements regarding AI chip exports is a testament to its resilience. There are several examples of sharp declines in its stock price following such announcements:

1. September 1, 2022: When the U.S. government halted exports of AI chips to China and Russia, NVIDIA's stock plunged by 6.6%. However, the market soon recalibrated, and the stock rebounded by approximately 3% over the next few days.

2. October 17, 2023: A similar situation occurred when new restrictions were announced, banning certain AI chips from being sold to China. NVIDIA's stock dropped 4.7%, but once again, it rebounded by about 2.5% within a week, supported by a positive outlook on the company’s long-term potential.

In both cases, the market's initial reaction to export restrictions was sharply negative, but a recovery followed this as investors reassessed the situation. These instances suggest that while NVIDIA's stock may face short-term volatility due to government policy, it tends to bounce back, reflecting confidence in its underlying business.

While the current situation may seem daunting, it is important to consider the underlying fundamentals of NVIDIA's business. The company's innovative AI chips have been instrumental in driving advancements in various industries, including autonomous vehicles, healthcare, and gaming. The demand for these technologies is expected to continue growing, providing a strong foundation for NVIDIA's future.

The Case for Holding

Considering the recent underperformance, taking profits at $130 may seem like a prudent decision. However, history shows that NVIDIA tends to rebound from such declines as the market digests the news and adjusts expectations. Investors who are focused on the company’s fundamentals, rather than short-term market fluctuations, should consider holding onto their shares.

Additionally, NVIDIA’s 179% rise this year indicates strong momentum, and while export restrictions could pose headwinds, they are unlikely to derail the broader AI-driven growth narrative. The market's initial reactions to government announcements are often exaggerated, and I expect a similar situation to unfold here—short-term volatility followed by a quick recovery.

In conclusion, NVIDIA's stock has faced challenges due to export controls, but it has consistently demonstrated resilience. While the recent news of potential further restrictions is concerning, the company's strong fundamentals and historical performance suggest that a rebound is likely. For investors with a long-term horizon, this may be a time to consider accumulating shares rather than selling.

@TigerWire