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NVIDIA shares had been riding a high wave along with the rest of the semiconductor space a few days back amid high-paced developments related to the CHIPS Act. However, NVIDIA’s disastrous Q2 2022 preliminary results yesterday stole the proverbial jam from this rally. Now, two key developments stand a fair chance of redirecting focus toward the segment’s intrinsic bullish thesis.
As a refresher, NVIDIA disclosed $6.7 billion in preliminary Q2 2022 revenue yesterday, missing its own guidance by a whopping $1.4 billion. The company’s gaming division saw its quarterly revenue plummet by 44 percent on a sequential basis and 33 percent on an annual basis. The GPU manufacturer is reportedly suffering from the reverse bullwhip effect where it is unable to translate its elevated inventories into sales at the requisite pace.
NVIDIA shares had closed at around the $190 price level on Friday. By Monday’s close, the stock had plummeted to $177.93, entailing a drop of 6 percent relative to Friday's closing price. The stock is down another 4 percent currently.
U.S. PRESIDENT BIDEN SIGNS CHIPS ACT TO BOOST U.S. SEMICONDUCTOR MANUFACTURING AND COMPETE WITH CHINA
— *Walter Bloomberg (@DeItaone) August 9, 2022
This brings us to the crux of the matter. President Biden has now signed the CHIPS Act into law, unlocking $280 billion in incentives and grants, including $52 billion in federal investments and tax breaks for the domestic semiconductor research, design, and manufacturing provisions as laid out in the US Innovation and Competition Act (USICA). While NVIDIA does not have a fabrication facility of its own, it does stand to benefit from federal incentives related to chip research and design.
CATHIE WOOD SCOOPS UP MORE THAN $60 MILLION OF NVIDIA FOLLOWING CHIPMAKER’S REVENUE WARNING -CNBC already underwater
— FXHedge (@Fxhedgers) August 9, 2022
In another positive development, Cathie Wood’s ARK Invest just purchased around $60 million worth of NVIDIA shares. Wood is a firm believer in the ‘Buy the Dip’ investing philosophy, often swooping in to pick up downtrodden stocks. Cumulatively, ARK Invest now owns over 622,000 NVIDIA shares at an average price of $189.89.
Do you think NVIDIA shares are trading at a significant discount to their long-term value right now? Let us know your thoughts in the comments section below.