World leader in Artificial Intelligence computing, Nvidia, has seen its share price experience a notable rebound, rising approximately 3% during Thursday’s trading session.
This recovery follows a significant drop of 7% the previous day, which was triggered by geopolitical concerns stemming from comments made by Republican U.S. presidential aspirant Donald Trump.
Recall that on 17 July 2024, Trump who is vying for another White House mandate, said he thinks Taiwan should pay the U.S. for defense, claiming that the country “doesn’t give them anything.
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His comment was in response to a question in a Bloomberg interview, about whether he would defend Taiwan against China.
He said,
“Taiwan should pay us for defense. You know, we are no different than an insurance company. Taiwan doesn’t give us anything. Taiwan did take about 100% of our chip business”.
Trump’s comment appeared to be linked to Taiwan’s semiconductor industry, which is one of the most advanced in the world. It is worth noting that the U.S. was once a major player in semiconductor manufacturing, but shifting trends in the industry, such as companies moving away from making their chips, led to the rise of Taiwan Semiconductor Manufacturing Company.
The initial plunge in Nvidia’s stock was a reaction to Trump’s remarks, which introduced uncertainty and potential risks for the tech industry. Investors were particularly concerned about the implications of Trump’s statements on international trade policies, which could impact Nvidia’s global operations and supply chains.
However, UBS analysts wrote in a Thursday note that investors are taking gains from strong semiconductor performers and reallocating them into other shares. However, it noted that forthcoming commentary later this year on how companies are making a return on investment in Al chips may spur the sector higher again.
As a leading player in the semiconductor industry, Nvidia is deeply integrated into international markets, and any geopolitical instability or policy changes could affect its business prospects.
However, the market’s swift recovery the following day suggests that investors reassessed the situation and regained confidence in Nvidia’s strong fundamentals and growth potential. The 3% rise in share price indicates a resilient market sentiment and the belief that Nvidia’s long-term prospects remain robust despite short-term uncertainties.
Moreover, Nvidia’s recent ventures, such as its involvement in Al-driven technologies and the expansion of its data center capabilities, have reinforced its position as a market leader. These factors likely contributed to the quick recovery in its stock price as investors weighed the broader opportunities against the immediate concerns raised by Trump’s comments. Nvidia stock is up more than 150% so far in 2024.
Notably, the swift rebound in the Artificial Intelligence company’s stock, also reflects a broader trend in the stock market, where tech stocks often experience volatility due to geopolitical news but tend to recover quickly due to strong underlying business fundamentals.
Nvidia’s case exemplifies how investor sentiment can be influenced by external factors but ultimately hinges on the company’s performance and strategic direction.