Shares of red-hot Apple and Nvidia have hit rough patches. Here's what we think is happening

Shares of red-hot Apple and Nvidia have hit rough patches. Here’s what we think is happening

August 10, 2023

in Economy

Reading Time: 4 mins read

Apple (AAPL) and Nvidia (NVDA) — the Club’s two “own it, don’t trade it” stocks — have seen their fortunes sour somewhat in recent weeks, sliding to become among our five worst-performing holdings in August. Plenty of investors may be bailing on these two stellar performers. We are not. “I think Apple and Nvidia are the two you have to watch,” Jim said Thursday morning. “They have to stop [declining].” .SPX AAPL,NVDA 1M mountain The S & P 500’s performance over the past month compared with Apple and Nvidia. Despite initially trading modestly higher Thursday morning, Apple and Nvidia shares steadily lost ground into the afternoon in lockstep with the market. They popped a bit with the S & P 500 ‘s brief move positive just before 2 p.m. ET, before leveling off around the flat line. For the month of August, Apple and Nvidia have both lost about 9%, giving back some of their spectacular year-to-date gains. Both hit record highs in mid-July. The recent moves in Apple and Nvidia have coincided with a roughly 2% drop in the S & P 500 so far in August, after finishing the July 31 session at 4,588.96 — its peak for the year. At the index level, it’s not necessarily a shock to see some weakness. Overbought conditions in the market for much of late July suggested investors stay vigilant and prepare for a pullback. There are no guarantees that Apple and Nvidia — two of the largest stocks in the S & P 500 and large contributors to the index’s 17% gain this year — will shake their recent malaise anytime soon. When it does happen, though, we’ll be around to see it. “Apple’s gotten stuck,” Jim said, falling in six of the seven August trading days, as of Wednesday’s close. Apple’s June quarter, released a week ago, hasn’t helped matters, with the once-$3 trillion company now valued below that level . AAPL YTD mountain Apple YTD performance In our minds, the iPhone maker’s results were impressive – led by a record $21.2 billion in high-margin Services revenue. Combined with the largest base of installed devices in company history, those are more than enough reasons for us to look past weaker-than-expected Products sales. Other investors have viewed the quarter differently. So be it, as Jim wrote earlier this week . That’s the sellers’ mistake. The “own it, don’t trade it” mantra is built for moments like this, giving us an intellectual foundation to keep our eyes on focused on Apple’s bright multiyear prospects and not minor quarter-to-quarter fluctuations. Apple shares are still up a robust 37% for the year. The annual September new product launch also is right around the corner. All is not lost. NVDA YTD mountain Nvidia YTD performance Nvidia’s stock chart may get worse before it gets better. “I do not think you should start to buy Nvidia right here, right now,” Jim said Thursday. “I think it’s going to go lower.” The stock’s nearly 5% decline Wednesday may be tied to a supply warning from server maker Super Micro Computer , which Morgan Stanley analysts called a “key” original equipment manufacturer customer for Nvidia. Step back a little bit, though, and here’s a stock that more-than tripled in value in 2023 by the time August rolled around, thanks to investor optimism around its artificial intelligence chips. It’s reasonable to conclude a breather is in order, which last week on “Mad Money” is exactly what market historian and veteran chartist Larry Williams told Jim could happen. “Be careful,” Williams said. “I like Nvidia longer term, but short term I agree with [Williams],” Jim said Thursday. “Short term, Nvidia was up 200%, the most in the S & P, and that’s just a rather high bar.” To be sure, Nvidia’s stock entering a period of digestion is not the same thing as its fundamental business is souring. Quite the opposite. The king of AI chips this week made a series of announcements aimed at strengthening its already-dominant position in the market . What’s more, the Financial Times reported that Chinese internet giants, including Alibaba and TikTok parent ByteDance, ordered $5 billion worth of AI chips from Nvidia, in a scramble to beat any new U.S. export restrictions on the key pieces of technology. Bottom line Put it together, and there’s no change to our stance on Nvidia. The ascent higher just may be on hold, for now. Investors whose focus is different than ours at the Club are bailing on Apple and Nvidia, turning what had once been two sterling stock charts into sour situations. We’re not going to try and trade around it. (Jim Cramer’s Charitable Trust is long NVDA and AAPL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. 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Apple CEO Tim Cook speaks before the start of the Apple Worldwide Developers Conference at its headquarters on June 05, 2023 in Cupertino, California. Apple CEO Tim Cook kicked off the annual WWDC23 developer conference.

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