Nvidia (NASDAQ: NVDA) was among the tech stocks plunging today after the Bureau of Labor Statistics reported cooler-than-expected job growth in August. Just 142,000 jobs were added last month, below expectations at 161,000, and readings from June and July were revised downward as well.
The news led investors to believe that the economy was weakening faster than expected, which could be particularly damaging for growth and tech stocks like Nvidia that are relying on billions in infrastructure spending to advance new generative artificial intelligence (AI) technologies.
As a result, tech stocks were down broadly with the Nasdaq Composite down 2.3% as of 1:19 p.m. ET, and Nvidia was off 4% at the same time after falling as much as 5.8% earlier in the session. The iShares Semiconductor ETF was down 4% as well, showing the chip sector was broadly impacted.
What it means for Nvidia
It’s been a rough week for the AI chip leader. The stock plunged on Tuesday, seemingly because of rumors that the Justice Department had issued it a subpoena related to an antitrust investigation, though Nvidia later said that wasn’t true.
Still, today’s pullback shows that the stock is sensitive to the broader macro environment. Investors apparently believe that a recession or an economic slowdown could slam the brakes on the AI boom as it would deter big tech companies and start-ups from investing in the new technology.
That would be a problem for Nvidia as its business and its lofty valuation is based on soaring demand for its data center GPU components, which are highly valued for their ability to run complex AI models.
Why it could be a buying opportunity
The jobs report is just one data point of many, and while there are other signs that the economy is weakening, it doesn’t look like a recession is around the corner — the unemployment rate is still low at 4.2%.
Additionally, the Federal Reserve is expected to cut interest rates later this month, which should give a boost to Nvidia and the broader economy.
The stock did fall after its earnings report last week, but its overall numbers were strong. The business continues to grow exceptionally fast, and it expects to ramp up production of its new Blackwell platform, which is already seeing strong demand, in Q4.
Finally, Nvidia’s biggest customers, like Microsoft, Alphabet, and Meta Platforms, are unlikely to be fazed by a hiccup in the economy as these companies are sitting on tens of billions of dollars in cash and have all declared that investing in AI infrastructure is a top priority.
It would likely take a significant economic crash to derail their investment plans, meaning Nvidia is more protected from economic volatility than it may seem. That’s a good reason to bet on the stock recovering from today’s slide.
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Nvidia Stock Falls Again. Should You Buy the Dip? was originally published by The Motley Fool
