After going up very quickly for three days, Nvidia Corp. stock is now slowing down, but not as much as some other chip stocks.
In the last three sessions, Nvidia shares NVDA, +0.81% went up about 20%, but they’re down a little bit in early trading on Wednesday. That makes it harder for the company to reach a market value of $3 trillion or pass Apple Inc. in terms of value: Apple stock is up about 1%.
On Wednesday, other chip stocks are trading with more selling pressure than Nvidia’s. AMD stock is down almost 4%, and ARM stock is down more than 3%. Shares of Advanced Micro Devices Inc. (AMD) are down 3.77%. Qualcomm Inc. shares QCOM, -2.27% are down more than 1% and Marvell Technology Inc. shares MRVL, -3.26% are down more than 2%. It is down almost 2% on the PHLX Semiconductor Index SOX.
The chip sector went down on Wednesday after a sharp rise on Tuesday that “seemed like a blow out of the rotation or trade that has been going on all [year] long,” according to Jordan Klein, an analyst at Mizuho. He meant that investors were putting their money into chip stocks instead of software stocks, especially those that were tied to AI.
Is now the time for software stocks to shine? Today there are a lot of big earnings reports, such as ones from Okta Inc. OKTA, +0.22% and Salesforce Inc. CRM, +0.66% Klein, on the other hand, said that recent “reactions to what looks like improving consumption software earnings” haven’t caused investors to switch their attention to small and medium-sized growth software plays.
“Given the [Workday] results and the general lack of trust in software, we do not see a lot of upside potential in [Salesforce’s] print,” wrote Kirk Materne, an analyst at Evercore ISI.
The April U.S. inflation report, which comes out on Friday, could also have an effect on the software industry because it could change the way interest rates are set. Klein said, “So software investors are probably playing a lot more DEFENCE vs. OFFENCE because they are afraid that anything cautious, disappointing, or negative could cause more money to leave the group.”
The iShares Expanded Tech-Software Sector ETF IGV is down 4.5% over the last three months, while the PHLX Semiconductor Index is up 10.9%.
Klein wrote, “It sort of looks and feels to me like the focus on AI, stubborn inflation in the U.S. services sector, and some uncertainty in corporate earnings into [calendar 2025] will potentially keep software as a broader sector from roaring back to lead the tech tape in [the second half of 2024].”
