CFDs are complex instruments. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. CFDs are complex instruments. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

Nvidia shares are in the hands of supply and demand

Nvidia’s share price rose by 547% between March 2020 and November 2021 to $330 per share. But down 27.5% year-to-date, its trajectory remains uncertain.

Nvidia (NASDAQ: NVDA) share price has been one of the prime beneficiaries of the covid-19 pandemic, as demand for semiconductors soared on the cultural adoption of home working and cryptocurrency.

But Nvidia shares fell to $221 on 11 March, as its plans to acquire ARM collapsed and the Russia-Ukraine war shook market confidence. After recovering to $277 by 25 March, they have now fallen to $222 today.

Nvidia share price: 3 factors to consider

1) Analysts divided

Semiconductor demand may finally be slowing. Truist analyst Willian Stein has warned of ‘a sudden negative shift in demand signals from a wide swath of computer, consumer, and communications OEMs to at least some of their semi suppliers.’

Moreover, he’s concerned that ‘a combination of just enough demand destruction and just enough additional supply is leading to a traditional cyclical downturn.’ While keeping Nvidia shares at a buy, the analyst has cut his price target from $347 to $298.

Meanwhile, RW Baird has downgraded Nvidia from outperform to neutral and cut its price target from $360 to $225. The investment bank believes demand for Nvidia GPUs is likely to fall as they are no longer needed to mine Ethereum after the cryptocurrency’s hard fork.

On the other hand, Keybanc has a $310 target and an overweight rating. New Street Research has upgraded the stock from neutral to buy, with a $280 target. And Cowen has assigned Nvidia an outperform rating and a $350 target.

With Nvidia’s anticipated price range between $225 and $350, continued volatility seems certain.

2) Supply chain shocks

A potent cocktail of high demand and low supply has been key to driving Nvidia’s share price rally. If demand stays strong, this could be to Nvidia’s benefit. And the supply crunch could be about to worsen.

First, there’s the impact of the Russia-Ukraine war. The two countries are globally significant producers of semiconductor-critical materials including Palladium, Platinum, Nickel, Gold and Neon. All are at or close to record highs as exports collapse.

There’s also the resurgent pandemic in China to contend with, which saw Shanghai enter total lockdown. While restrictions are now easing, the busiest port in the world and global semiconductor centre is likely to minimise activity if Beijing continues with its ‘zero-covid’ policy.

Finally, there’s the 3M factory in Zwijndrecht, Belgium to consider. Responsible for 80% of global production of semiconductor coolant perfluoroalkyl (PFAS), the plant has been ‘closed indefinitely under tightened local environmental regulations’ since early March. The company says its PFAS stockpile will only last another one to three months.

3M is investing $163 million to improve its disposal of PFAS chemicals but says ‘the timeline to resolve the situation is uncertain and, in several aspects, not in 3M’s control.’

3) Long-term demand

Inevitably, the supply chain issues will eventually resolve. Therefore, the long-term investment case hinges on continued high demand.

But inflation in the US, Nvidia’s home market, has hit an astronomical 8.5%. And it’s expected to rise even further. Meanwhile, the Federal Reserve is widely expected to raise interest rates by 50 basis points in May.

Worryingly, Reserve member James Bullard has warned it’s ‘fantasy’ to believe such small rate rises will be enough. Medium-term US disposable income could soon come to a screeching halt.

But the far-flung future could be different. Almost every aspect of the tech revolution relies on semiconductors. Hybrid working requires many employees to maintain two sets of equipment. And the cars of the EV revolution need twice as many chips to function.

Then there’s the continued attempts to legitimise cryptocurrency, the drive for rearmament with modern weapons, and the continued race for the Metaverse. At current projections, Nvidia already expects Q1 revenue to increase by at least 43% year-over-year to $8.1 billion.

But with analysts in disagreement amid shifting supply and demand, Nvidia shares in the long-term can only promise volatility.

Go short and long with CFDs on 16,000+ shares with our award-winning trading platform.* Learn more about trading shares with us, or open an account to get started today.

* Best trading platform as awarded at the ADVFN International Financial Awards 2021

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.