A Retiree Who Bought 1,000 Nvidia Shares at $122 Just Watched Chips Have Their Worst Day Since 2020
Chip stocks had their worst day since 2020. Here is what it did to one retiree's 1,000 Nvidia shares, and the case for holding or trimming.
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Nvidia (NASDAQ: NVDA) shareholders just lived through the roughest week for chip stocks in more than five years. On Thursday, the PHLX Semiconductor Index fell 12.25%, its biggest one-day drop since March 2020, as investors weighed what the new Congress could mean for data center construction. Nvidia fell 9.26% that day to $181.60. On Friday it bounced 2.78% to close at $186.64.
Even after the bounce, Nvidia ended the week 8.8% lower and sits 22% below its record close of $239.24 on Oct. 6.
Take a 64-year-old retiree who bought 1,000 shares on June 10, 2024, the day Nvidia’s 10-for-1 split took effect, at $121.79 a share. That was a $121,790 investment. At the October record the shares were worth $239,240. On Friday they were worth $186,640. They also hold $600,000 in other retirement savings and collect $2,500 a month from Social Security, so Nvidia is now 23.7% of a $786,640 portfolio. The question this weekend is whether Thursday was a warning to sell.
What happened to chip stocks this week
The sell-off hit almost every chip name at once. The iShares Semiconductor ETF fell 12.15%, its worst day since March 2020, and the VanEck Semiconductor ETF fell 11.21%. Micron fell 17.46% and Lam Research 16.36%. Nvidia’s 9.26% drop was one of the smaller ones.
That gap matters. The stocks that fell hardest sell equipment and memory, which depend on what chipmakers and data center owners plan to spend next year. Nvidia sells into demand that exists today. Investors were pricing in a slowdown in future spending more than a drop in current orders.
Friday brought some relief. Chip stocks rebounded across the board, and Nvidia traded as high as $194.90 during the day before settling at $186.64.
What the retiree’s shares have done
Measured from the purchase, the investment is still well ahead. The 1,000 shares cost $121,790 and are worth $186,640, a gain of $64,850, or 53.2%, in under two and a half years.
Measured from the peak, the shares have given back $52,600 in a month. Thursday alone took $18,530, and Friday returned $5,040 of it.
Nvidia also pays more than it used to. It raised its quarterly dividend to 25 cents a share this year, from 1 cent. On 1,000 shares that is $1,000 a year, a yield of 0.54% at Friday’s price. The dividend is small next to the price swings, but it is a sign the company is generating more cash than it needs.
The case for holding
The business is still growing at a pace few large companies have ever matched. Nvidia’s revenue over the past four reported quarters reached $302.97 billion, and its latest quarter’s revenue was up 105.9% from a year earlier.
The stock is also cheaper than it looks after a run like this. At $186.64, Nvidia trades at about 23.6 times its earnings over the past year. Of the 62 analysts tracked, 59 rate it a buy or strong buy, and their average price target is $327.14, about 75% above Friday’s close.
The next real test is close. Nvidia reports its quarterly results later this month, and that report will show whether customers are still ordering at the pace they were.
The case for trimming
The risk for this retiree is concentration. Nvidia is 23.7% of everything they own, and at the October peak it was 28.5%. A stock that can fall 9% in a day can fall 30% over a few months. A 30% drop from here would cost about $55,992, almost two years of the $30,000 a year Social Security pays them.
Well-known skeptics are still betting against the sector. Michael Burry disclosed this week that he took profits on a quarter of his bet against the VanEck Semiconductor ETF after Thursday’s plunge, and said the rest of the position remains very large.
A middle path
Selling part of the position is a reasonable option. If the retiree sells 300 of the 1,000 shares at Friday’s price:
- Proceeds: $55,992
- Taxable gain: $19,455, since each share cost $121.79
- Federal tax at the 15% long-term rate: about $2,918
- What remains: 700 shares worth $130,648, or 16.6% of the portfolio
If the shares sit in a traditional IRA, the sale itself creates no tax bill today.
Trimming keeps most of the upside if the analysts are right and the next report is strong. It also moves some of a paper gain into cash before the report, when the stock is likely to swing again.
Where this is weak
No one knows whether Thursday was the start of a longer slide or a sharp one-day scare. The analyst targets were mostly set before this week. And the $2,918 tax figure assumes the retiree’s income keeps them in the 15% long-term capital gains bracket; a larger sale could push part of the gain higher.
The bottom line
A 64-year-old who turned $121,790 into $186,640 with Nvidia is still well ahead, even after losing $18,530 on the chip sector’s worst day since 2020. The bigger question is whether 23.7% of a retirement should ride on one stock heading into its next earnings report. Selling 300 shares would cut that to 16.6% for about $2,918 in tax and keep 700 shares in the game.
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I've been writing about stocks and personal finance for 20+ years. I believe all great companies are tech companies in the long run, and I invest accordingly.
