Why Nvidia, Amazon, and Apple Stocks All Slumped Tuesday Morning

What happened

If there is a single slogan that defines 2022, that would be inflation. Consumers and investors alike have been looking for signs that rising prices will eventually subside.

When the latest government report on inflation came out Tuesday morning, it revealed that while prices weren’t rising as fast as they had, the news was even worse than expected, prompting a widespread sell-off. on Wall Street.

With that as a backdrop, the actions of nvidia (NVDA -7.20%) fell to 7.8%, Amazon (AMZN -5.47%) plummeted as much as 6%, and Apple (AAPL -4.77%) fell to 4.5%. As of 12:45 pm ET, the trio was still trading down 7.5%, 5.1% and 4.2%, respectively.

To be clear, there was little company-specific news driving these tech stocks lower, and what could be found was decidedly positive. This suggests that investors were hyper-focused on macroeconomic data and what it means for the future.

And that

The monthly report from the US Bureau of Labor Statistics presented the state of inflation for the month of August, and things were even worse than many expected. The Consumer Price Index (CPI), the most widely followed government measure of inflation, rose 0.1% in the month and was up 8.3% year over year.

To give context to this number, it is lower than the 8.5% that prices increased in July. Unfortunately, it was also worse than the 8.1% forecast issued by economists. “Core” data, which excludes highly volatile food and energy prices, rose a measly 6.3% over the previous 12 months.

If there was a silver lining to the cloudy inflation data, it was that energy prices continued to decline from recent highs, falling 5% on the month. The biggest contributor to the drop was lower prices at the pump, as the gasoline index fell a hefty 10.6%.

The declines were more than offset by increases in many basic needs, including higher food prices, which saw an 11.4% year-on-year increase, the largest annual increase since 1979.

Now what

Persistent inflation is weighing on investor confidence, but even as these dismal macro data gave them pause, there are actually some positive company-specific data that suggest investors should consider to buy these actions.

Reports suggest that Nvidia and Taiwan Semiconductor Manufacturing are working on a solution that would daisy chain multiple graphics processing units (GPUs) in a new way, which would be implemented for artificial intelligence (AI) uses. This could help boost Nvidia’s sales as the company has increasingly focused on technology used in cloud computing, data centers and AI, which has quickly become one of the biggest drivers. of company growth.

In Apple’s case, early pre-sale data for the iPhone 14 suggests strong demand. In recent days, several analysts tracking the data have reported that wait times are increasing for the iconic device. History suggests that longer shipping times correlate with strong demand.

Earlier Tuesday, prominent Apple supporter Evercore ISI analyst Amit Daryanani joined that chorus, noting that lead times are long, particularly for the iPhone 14 Pro, Pro Max and Plus models, according to The Fly. . The data suggests that consumers are turning to these higher-priced models, which could have a materially positive impact on the average selling price (ASP) of iPhones and Apple’s margins.

For its part, Amazon announced the debut of the latest model of its Kindle e-reader. The entry-level model, which the company calls “the lightest and most compact,” comes with numerous upgrades, providing a tempting alternative for users looking to join the digital reading crowd or replace an existing e-reader.

Electronics represent only a small part of Amazon’s business, so it certainly won’t move the needle. That said, it helps make the Amazon ecosystem stronger, attracting new customers and holding on to existing ones.

In the face of the ongoing Nasdaq bear market, shares of Nvidia, Amazon and Apple are currently trading down 60%, 30% and 14% from their respective highs. Additionally, these industry leaders are currently selling at 10, 6, and 2 times next year’s sales, respectively, each near their lowest valuations in multiple years. Given that they dominate their respective industries and have a long track record of overcoming challenges, macroeconomic and otherwise, this could be a great opportunity to buy shares of these iconic companies at a discount.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. danny vein has positions in Amazon, Apple and Nvidia. The Motley Fool has posts and recommends Amazon, Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: $120 long calls in March 2023 at Apple and $130 short calls in March 2023 at Apple. The Motley Fool has a disclosure policy.

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